Sunac China Holdings Limited — Proxy Solicitation & Information Statement 2017

Aug 31, 2017

THIS CIRCULAR IS IMPORTANT AND REQUIRES YOUR IMMEDIATE ATTENTION

If you are in any doubt as to any aspect of this circular or as to the action to be taken, you should consult your licensed securities dealer or registered institution in securities, bank manager, solicitor, professional accountant or other professional adviser.

If you have sold or transferred all your shares in Sunac China Holdings Limited, you should at once hand this circular to the purchaser or transferee or to the bank, licensed securities dealer or registered institution in securities or other agent through whom the sale or transfer was effected for onward transmission to the purchaser or the transferee.

Hong Kong Exchanges and Clearing Limited and The Stock Exchange of Hong Kong Limited take no responsibility for the contents of this circular, make no representation as to its accuracy or completeness and expressly disclaim any liability whatsoever for any loss howsoever arising from or in reliance upon the whole or any part of the contents of this circular.

SUNAC CHINA HOLDINGS LIMITED 融創中國控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 01918)

MAJOR TRANSACTION IN RELATION TO

INVESTMENT IN TARGET SHARES OF LESHI INTERNET, LESHI PICTURES AND LESHI ZHIXIN

Capitalised terms used on this cover page have the same meaning as defined in the section headed “Definitions” in this circular, unless the context requires otherwise.

A letter from the Board is set out on pages 7 to 39 of this circular.

The Investment has been approved by written shareholder’s approval obtained from Sunac International, the controlling shareholder of the Company, pursuant to Rule 14.44 of the Listing Rules in lieu of a general meeting of the Company. This circular is being dispatched to the Shareholders for information only.

31 August 2017

CONTENTS

			Page
Definitions . .	. . . .	. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	1 — 6
Letter from the Board . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .			7 — 39
Appendix I	—	Financial information of the Group . . . . . . . . . . . . . . . . . .	40 — 42
Appendix II	—	Financial information of Leshi Internet
		A. Audited consolidated financial statements of
		Leshi Internet for the year ended 31 December 2014 . . . .	43 — 181
		B. Audited consolidated financial statements of Leshi
		Internet for the year ended 31 December 2015 . . . . . . . . .	182 — 294
		C. Audited consolidated financial statements of Leshi
		Internet for the year ended 31 December 2016 . . . . . . . . .	295 — 457
		D. Unaudited consolidated financial statements of Leshi
		Internet for the first quarter ended 31 March 2017 . . . . . .	458 — 474
		E. Differences between accounting policies adopted by the
		Company (HKFRS) and Leshi Internet (CAS) . . . . . . . . .	475 — 485
Appendix III	—	Management discussion and analysis of Leshi Internet
		A. Management discussion and analysis of the results of
		Leshi Internet for the year ended 31 December 2014 . . . .	486 — 516
		B. Management discussion and analysis of the results of
		Leshi Internet for the year ended 31 December 2015 . . . .	517 — 542
		C. Management discussion and analysis of the results of
		Leshi Internet for the year ended 31 December 2016 . . . .	543 — 578
		D. Management discussion and analysis of the results of
		Leshi Internet for the first quarter ended 31 March 2017 .	579 — 588
Appendix IV	—	Financial information of Leshi Pictures
		A. Audited consolidated financial statements of Leshi
		Pictures for the year ended 31 December 2016 . . . . . . . .	589 — 616
		B. Unaudited consolidated financial statements of Leshi
		Internet for the first quarter ended 31 March 2017 . . . . . .	617 — 647
		C. Differences between accounting policies adopted by the
		Company (HKFRS) and Leshi Pictures (CAS) . . . . . . . . .	648 — 655
Appendix V	—	Unaudited Pro Forma Financial Information
		of the Enlarged Group . . . . . . . . . . . . . . . . . . . . . . . . . . .	656 — 661
Appendix VI	—	General information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .	662 — 676

— i —

DEFINITIONS

In this circular, the following expressions shall have the meanings set out below unless the context requires otherwise:

“Acquisition” the acquisition of the Target Shares by Tianjin Jiarui (or its designees) pursuant to the terms of the Acquisition Agreements

“Acquisition Agreements” the Leshi Internet SP Agreement, the Leshi Pictures SP Agreement, the Leshi Zhixin SP Agreements and the Leshi Zhixin Capital Increase Agreement

• “Announcement” the announcement of the Company dated 13 January 2017

• “Board” the board of Directors

• “CAS”

China Accounting Standards, which are the generally accepted accounting principles in the PRC

• “Chongqing Leshijie” 重慶樂視界置業發展有限公司 (Chongqing Leshijie Property Development Company Limited*), a company established in the PRC with limited liability

• “Chongqing Leshijie Acquisition” the acquisition of 50% equity and debt interests in Chongqing Leshijie by Chongqing Sunac from Leshi Investment on 1 March 2017

“Chongqing Sunac” 重慶融創基業房地產開發有限公司 (Chongqing Sunac Heritage Real Estate Development Company Limited*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company

• “Company”

Sunac China Holdings Limited, a company incorporated under the laws of the Cayman Islands with limited liability, and the shares of which are listed on the Main Board of the Stock Exchange (stock code: 01918)

— 1 —

DEFINITIONS

“Contractual Arrangements” the contractual arrangements entered into between Sunac Real Estate, Tianjin Yingrui, Tianjin Jiarui and/or the Registered Shareholders, namely, (i) the exclusive technology consulting and services agreement (the “ Exclusive Technology Consulting and Services Agreement ”); (ii) the entrustment agreements (the “ Entrustment Agreements ”); (iii) the exclusive option agreements (the “ Exclusive Option Agreements ”); (iv) the loan agreements with each of the Registered Shareholders as borrowers (the “ Loan Agreements ”); (v) the equity pledge agreements (the “ Equity Pledge Agreements ”); and (vi) the confirmation letters from the spouse of each of the Registered Shareholders, the details of which are set out in the paragraph headed “INFORMATION ON THE CONTRACTUAL ARRANGEMENTS” in this circular “CSRC” China Securities Regulatory Commission (中華人民共和國證 券監督管理委員會) “Director(s)” the director(s) of the Company “Enlarged Group” the Group after completion of the Investment “Group” the Company and its subsidiaries “HKFRS” the Hong Kong Financial Reporting Standards issued by the Hong Kong Institute of Certified Public Accountants from time to time “HK$” Hong Kong dollar, the lawful currency of Hong Kong

• “Hong Kong” the Hong Kong Special Administrative Region of the People’s Republic of China

• “Investment” the acquisition of the economic interest in the Target Shares by the Group through the Contractual Arrangements

• “Latest Practicable Date” 30 August 2017, being the latest practicable date for the purpose of ascertaining certain information for inclusion in this circular

• “Leshi Companies” collectively, companies under the Leshi ecosystem directly controlled or indirectly controlled through Leshi Holding and/or Leshi Internet by Mr. Jia (excluding Leshi Internet and its subsidiaries)

— 2 —

DEFINITIONS

• “Leshi Holding”

• 樂視控股(北京)有限公司 (Leshi Holding (Beijing) Co., Ltd.*), a company established in the PRC with limited liability

• “Leshi Internet”

• 樂視網信息技術(北京)股份有限公司 (Leshi Internet Information & Technology Corp (Beijing)*), a company established in the PRC with limited liability whose shares are listed on the Shenzhen Stock Exchange (stock code: 300104)

• “Leshi Internet Interest” the equity interest being acquired by Tianjin Jiarui pursuant to the terms of the Leshi Internet SP Agreement, representing 8.61% equity interest in Leshi Internet

• “Leshi Internet SP Agreement” the sale and purchase agreement dated 13 January 2017 entered into between Mr. Jia and Tianjin Jiarui in relation to the acquisition of the Leshi Internet Interest

• “Leshi Investment”

• 樂視投資管理(北京)有限公司 (Leshi Investment Management (Beijing) Company Limited*), a company established in the PRC with limited liability and a wholly-owned subsidiary of Leshi Holding

• “Leshi Pictures”

• 樂視影業(北京)有限公司 (Le Vision Pictures (Beijing) Co. Ltd.*), a company established in the PRC with limited liability

• “Leshi Pictures Interest” the equity interest being acquired by Tianjin Jiarui pursuant to the terms of the Leshi Pictures SP Agreement, representing 15% equity interest in Leshi Pictures

• “Leshi Pictures SP Agreement”

• the sale and purchase agreement dated 13 January 2017 entered into between Leshi Holding, Mr. Jia and Tianjin Jiarui in relation to the acquisition of the Leshi Pictures Interest

• “Leshi Zhixin”

• 樂視致新電子科技(天津)有限公司 (Leshi Zhixin Electronic Technology (Tianjin) Limited*), a company established in the PRC with limited liability

• “Leshi Zhixin Capital Increase Agreement”

• the capital increase agreement dated 13 January 2017 entered into between Mr. Jia, Leshi Zhixin and Tianjin Jiarui in relation to the capital increase by Tianjin Jiarui into Leshi Zhixin in an amount of RMB3,000,000,000

• “Leshi Zhixin Interest”

• the equity interest being acquired by Tianjin Jiarui pursuant to the terms of the Leshi Zhixin SP Agreements and the Leshi Zhixin Capital Increase Agreement, representing in aggregate 33.4959% equity interest in Leshi Zhixin (on a post-capital increase basis)

— 3 —

DEFINITIONS

• “Leshi Zhixin SP Agreement A” the sale and purchase agreement dated 13 January 2017 entered into between Mr. Jia, Leshi Internet, Leshi Zhixin and Tianjin Jiarui in relation to the acquisition of 10.3964% equity interest in Leshi Zhixin (on a pre-capital increase basis)

• “Leshi Zhixin SP Agreement B” the sale and purchase agreement dated 13 January 2017 entered into between Mr. Jia, Xinle Asset, Leshi Zhixin and Tianjin Jiarui in relation to the acquisition of 15.7102% equity interest in Leshi Zhixin (on a pre-capital increase basis)

• “Leshi Zhixin SP Agreements” the Leshi Zhixin SP Agreement A and the Leshi Zhixin SP Agreement B

• “Listing Rules” the Rules Governing the Listing of Securities on the Stock Exchange

• “Mr. Jia” Mr. Jia Yueting, the founder of the Target Companies “Mr. Wang” Mr. Wang Peng, one of the Registered Shareholders “Mr. Zheng” Mr. Zheng Pu, one of the Registered Shareholders “PRC” the People’s Republic of China excluding, for the purpose of this circular, Hong Kong, the Macau Special Administrative Region of the People’s Republic of China and Taiwan

• “PRC Legal Adviser” Beijing Jincheng Tongda Law Office (北京金誠同達律師事務 所), the legal adviser to the Company as to the laws of the PRC

• “Priority Investment Rights” Tianjin Jiarui will have the right of first refusal to purchase the shares in the Leshi Companies under the same conditions with respect to such shares sold by Mr. Jia and the priority investment right with respect to the increase of registered capital or issue of new shares by such companies

• “Registered Shareholders” Mr. Wang and Mr. Zheng, being senior management of the Company, legal owners of the equity interest of Tianjin Yingrui as to 50% each

— 4 —

DEFINITIONS

• “RMB” Renminbi, the lawful currency of the PRC “SFO” the Securities and Futures Ordinance (Chapter 571 of the Laws of Hong Kong)

• “Shanghai Longshi” 上海隆視投資管理有限公司 (Shanghai Longshi Investment Management Company Limited*), a company established in the PRC with limited liability

• “Shanghai Longshi Acquisition” the acquisition of 50% equity and debt interests in Shanghai Longshi by Shanghai Sunac from Leshi Holding on 13 March 2017

• “Shanghai Sunac” 上海融創房地產開發有限公司 (Shanghai Sunac Real Estate Development Company Limited*) a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company

• “Share(s)” ordinary shares of HK$0.10 each in the share capital of the Company

• “Shareholder(s)” holder(s) of the Share(s) “Stock Exchange” The Stock Exchange of Hong Kong Limited

• “Sunac International” Sunac International Investment Holdings Ltd, a company incorporated under the laws of the British Virgin Islands, a controlling shareholder of the Company as at the date of this circular

• “Sunac Real Estate” 融創房地產集團有限公司 (Sunac Real Estate Group Co., Ltd.*), a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company

• “Target Companies” Leshi Internet, Leshi Pictures and/or Leshi Zhixin (as the case may be)

• “Target Shares” the Leshi Internet Interest, the Leshi Pictures Interest and/or the Leshi Zhixin Interest (as the case may be)

• “Tianjin Jiarui” 天津嘉睿匯鑫企業管理有限公司 (Tianjin Jiarui Huixin Corporate Management Co., Ltd.*), a company established in the PRC with limited liability, which is a wholly-owned subsidiary of Tianjin Yingrui

— 5 —

DEFINITIONS

“Tianjin Yingrui” 天津盈瑞匯鑫企業管理有限公司 (Tianjin Yingrui Huixin Corporate Management Co., Ltd.), a company established in the PRC with limited liability, which is owned as to 50% by Mr. Wang and 50% by Mr. Zheng “Xinle Asset” 鑫樂資產管理(天津)合夥企業(有限合夥) (Xinle Asset Management (Tianjin) Partnership (Limited Partnership)), a partnership established in the PRC with limited liability “%” per cent.

• In this circular, the English names of the PRC entities are translation of their Chinese names, and are included herein for identification purpose only. In the event of any inconsistency, the Chinese names shall prevail.

— 6 —

LETTER FROM THE BOARD

SUNAC CHINA HOLDINGS LIMITED 融創中國控股有限公司

(incorporated in the Cayman Islands with limited liability)

(Stock Code: 01918)

Executive Directors:

Mr. SUN Hongbin (Chairman) Mr. WANG Mengde (Chief Executive Officer) Mr. JING Hong Mr. CHI Xun Mr. TIAN Qiang Mr. SHANG Yu Mr. HUANG Shuping Mr. SUN Kevin Zheyi

Independent non-executive Directors:

Mr. POON Chiu Kwok Mr. ZHU Jia Mr. LI Qin Mr. MA Lishan Mr. TSE Chi Wai

Registered Office: 190 Elgin Avenue George Town Grand Cayman KY1- 9005 Cayman Islands

Head Office: 10F, Building C7 Magnetic Plaza Binshuixi Road Nankai District Tianjin 300381 PRC

Principal Place of Business in Hong Kong: 36/F, Tower Two, Times Square 1 Matheson Street Causeway Bay Hong Kong 31 August 2017

To the Shareholders

Dear Sir/Madam,

MAJOR TRANSACTION IN RELATION TO INVESTMENT IN TARGET SHARES OF LESHI INTERNET, LESHI PICTURES AND LESHI ZHIXIN

INTRODUCTION

Reference is made to the Announcement in relation to, among other matters, the Investment.

— 7 —

LETTER FROM THE BOARD

This circular is despatched to the Shareholders for information purposes only. No general meeting will be convened to approve the Investment as the Company had obtained written approval for the Investment in accordance with Rule 14.44 of the Listing Rules from Sunac International, the controlling shareholder of the Company, which held approximately 52.92% of the issued share capital of the Company as at the date of such written approval. In addition, to the best of the Directors’ knowledge, information and belief, after having made all reasonable enquiries, none of the Shareholders had any material interest in the Investment and therefore no Shareholder would be required to abstain from voting if the Company were to convene a general meeting for the approval of the Investment.

The Investment involved the Group’s acquisition of economic interest in 8.61% equity interest in Leshi Internet, 15% equity interest in Leshi Pictures and 33.4959% equity interest in Leshi Zhixin through the Contractual Arrangements.

As of the Latest Practicable Date, each of Leshi Internet, Letshi Pictures and Leshi Zhixin was accounted for as an associate of the Company in the consolidated financial statements of the Group.

The purpose of this circular is to provide you with, among others, (i) further details of the Investment and the Acquisition; (ii) the financial information of the Group; (iii) the financial information of the Target Companies; (iv) the unaudited pro forma financial information of the Enlarged Group; and (v) other information as required under the Listing Rules.

Details of the Acquisition Agreements and the Contractual Arrangements are set out below.

THE LESHI INTERNET SP AGREEMENT

Date

13 January 2017

Parties

• (i) Mr. Jia; and

• (ii) Tianjin Jiarui.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquires, Mr. Jia is independent of the Company and connected persons (as defined in the Listing Rules) of the Company.

— 8 —

LETTER FROM THE BOARD

Assets to be acquired

Mr. Jia conditionally agreed to sell, and Tianjin Jiarui (or its designees) conditionally agreed to acquire, 170,711,107 non-restricted outstanding shares in Leshi Internet, representing 8.61% of the issued shares of Leshi Internet as at the date of the Leshi Internet SP Agreement.

Consideration and basis of consideration

The consideration per share payable by Tianjin Jiarui for the Leshi Internet Interest was RMB35.39 and the aggregate consideration payable for it was RMB6,041,466,076.73.

The consideration was arrived at after arm’s length negotiations between the parties principally with reference to the trading price per share of Leshi Internet before suspension of trading in open markets, taking into account the market value of the assets attributable to 8.61% equity interest in Leshi Internet.

The consideration payable by Tianjin Jiarui for the Leshi Internet Interest was paid by the proceeds of loans which were in turn funded by the internal resources of the Group to Tianjin Jiarui directly or indirectly by way of loans.

Payment of consideration and conditions precedent to payment of consideration

Payment of consideration for the Leshi Internet Interest was conditional upon and subject to the fulfillment (or waiver by Tianjin Jiarui) of the following conditions:

• (1) all the documents required for the transactions contemplated under the Leshi Internet SP Agreement having been duly executed and remaining in effect;

• (2) Tianjin Jiarui having completed its due diligence on Leshi Internet and related parties and there being no material deviation in the due diligence results from Mr. Jia’s and Leshi Internet’s disclosures;

• (3) Mr. Jia’s representations and warranties in the Leshi Internet SP Agreement remaining true, accurate and complete;

• (4) there being no material adverse change (or impact) affecting the Leshi Internet Interest, Leshi Internet or the performance of the Leshi Internet SP Agreement; and

• (5) there being no litigation, arbitration, administrative proceedings, court judgment, governmental orders or law (i) prohibiting or restricting the transactions contemplated under the Leshi Internet SP Agreement, affecting completion thereof, or having material adverse impact thereon; (ii) whereby Tianjin Jiarui will be legally liable or subject to serious penalty as a result of completing the transactions contemplated under the Leshi Internet SP Agreement or (iii) restricting the operations of Tianjin Jiarui or Leshi Internet and thereby constituting a material adverse change.

— 9 —

LETTER FROM THE BOARD

Pursuant to the terms of the Leshi Internet SP Agreement, subject to the fulfillment (or waiver) of the above payment conditions, Tianjin Jiarui shall pay all the consideration to Mr. Jia’s account within five business days of the entering into of the Leshi Internet SP Agreement, RMB3,000,000,000 of which will be prioritized for the purposes of releasing the pledge created over the Leshi Internet Interest, and Tianjin Jiarui is entitled to supervise the use of such fund. As of the Latest Practicable Date, Tianjin Jiarui had paid all of the consideration in accordance with the terms of the Leshi Internet SP Agreement.

Completion and conditions precedent to completion

The transactions contemplated under the Leshi Internet SP Agreement were conditional upon the Company having obtained all necessary approvals as required under the Listing Rules.

As the Company had obtained the written approval from Sunac International and no other approval was required to be obtained by the Company under the Listing Rules, such condition had been fulfilled and the registration of the transfer of the Leshi Internet Interest was completed on 29 March 2017.

Upon completion of the transactions contemplated under the Leshi Internet SP Agreement, Leshi Internet was owned as to 8.61% by Tianjin Jiarui and became an associate of the Company.

Management rights

• (1) Within 30 days of completion of the transactions contemplated under the Leshi Internet SP Agreement, Mr. Jia shall procure that the board of Leshi Internet shall comprise five directors and Tianjin Jiarui shall be entitled to nominate one non-independent director and one independent director to the board of Leshi Internet. Mr Jia undertakes to vote in favor of the director nominations of Tianjin Jiarui.

• (2) The board shall establish as sub-committees the Investment Decision-making Committee and the Management Committee. Tianjin Jiarui has the right to nominate one member for the Investment Decision-making Committee and one member for the Management Committee. Mr. Jia undertakes to and shall cause the directors nominated by him to vote for the resolutions on nominating members of the Investment Decision-making Committee and the Management Committee of Tianjin Jiarui.

• (3) Tianjin Jiarui shall be entitled to nominate one finance manager.

• (4) Tianjin Jiarui or its designated party has the right to appoint one supervisor to Leshi’s core companies under the cellphone segment, including Leshi Mobile Intelligent Information & Technology (Beijing) Co., Ltd. (樂視移動智能信息技術(北京)有限公司) and Leshi Cellphone E-Commerce (Beijing) Company Limited (樂視手機電子商務(北京)有限公司).

As at the Latest Practicable Date, the appointment of the relevant directors and finance manager of Leshi Internet as nominated by Tianjin Jiarui had been completed.

— 10 —

LETTER FROM THE BOARD

Pursuant to the terms of the Leshi Internet SP Agreement, in the event that the interests of Tianjin Jiarui, including its associates’ interests, are reduced below 5% in Leshi Internet, Tianjin Jiarui shall no longer have the aforesaid nomination rights unless such reduction is not due to Tianjin Jiarui’s acts.

Undertakings

Mr. Jia undertakes to Tianjin Jiarui, among other things, that within a reasonable period of time (not exceeding 12 months, but the aforesaid period may be extended with the prior consent by Tianjin Jiarui in writing) following completion of the transactions contemplated under the Leshi Internet SP Agreement, Mr. Jia shall decrease the pledge ratio of his shares in Leshi Internet to 50% or below, and he shall ensure the pledge ratio of the shares held by him in Leshi Internet to be maintained at 50% or below thereafter.

THE LESHI PICTURES SP AGREEMENT

Date

13 January 2017

Parties

• (i) Mr. Jia;

• (ii) Leshi Holding; and

• (iii) Tianjin Jiarui.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquires, each of Mr. Jia and Leshi Holding and its ultimate beneficial owners is independent of the Company and connected persons (as defined in the Listing Rules) of the Company.

Assets to be acquired

Leshi Holding conditionally agreed to sell, and Tianjin Jiarui (or its designees) conditionally agreed to acquire, 15% equity interest in Leshi Pictures.

Consideration and basis of consideration

The consideration payable by Tianjin Jiarui for the Leshi Pictures Interest was RMB1,050,000,000.

The consideration was arrived at after arm’s length negotiations between the parties principally with reference to the market value attributable to 15% equity interest in Leshi Pictures as agreed between the parties. The consideration implied a valuation of 100% equity interest in Leshi Pictures

— 11 —

LETTER FROM THE BOARD

at approximately RMB7 billion, which represented an approximately 30% discount to the valuation of 100% equity interest in Leshi Pictures at approximately RMB9.8 billion as set out in Leshi Internet’s announcement dated 6 May 2016, and was also determined with reference to the capital increase of Leshi Pictures in October 2015 whereby certain investor subscribed for the increased registered capital of Leshi Pictures at a total consideration of RMB975 million in exchange for approximately 13.98% equity interest in Leshi Pictures.

The consideration payable by Tianjin Jiarui for the Leshi Pictures Interest was paid by the proceeds of loans which were in turn funded by the internal resources of the Group to Tianjin Jiarui directly or indirectly by way of loans.

Payment of consideration and conditions precedent to payment of consideration

Payment of consideration for the Leshi Pictures Interest was conditional upon and subject to the fulfillment (or waiver by Tianjin Jiarui) of the following conditions:

• (1) all the documents required for the transactions contemplated under the Leshi Pictures SP Agreement having been duly executed and remaining in effect;

• (2) Leshi Pictures having completed all the internal approval process required for the purposes of completing the transactions under the Leshi Pictures SP Agreement including board and shareholder approvals and waiver of pre-emptive right by other shareholders;

• (3) completion of the registration of the transfer of the Leshi Pictures Interest;

• (4) Tianjin Jiarui having completed its due diligence on Leshi Pictures and related parties and there being no material deviation in the due diligence results from Leshi Holding’s, Mr. Jia’s and Leshi Pictures’ disclosures;

• (5) Leshi Holding’s and Mr. Jia’s representations and warranties in the Leshi Pictures SP Agreement remaining true, accurate and complete;

• (6) there being no material adverse change (or impact) affecting the Leshi Pictures Interest or the performance of the Leshi Pictures SP Agreement; and

• (7) there being no litigation, arbitration, administrative proceedings, court judgment, governmental orders or law (i) prohibiting or restricting the transactions contemplated under the Leshi Pictures SP Agreement, affecting completion thereof, or having material adverse impact thereon; (ii) whereby Tianjin Jiarui will be legally liable or subject to serious penalty as a result of completing the transactions contemplated under the Leshi Pictures SP Agreement or (iii) restricting the operations of Tianjin Jiarui or Leshi Pictures and thereby constituting a material adverse change.

Pursuant to the terms of the Leshi Pictures SP Agreement, Tianjin Jiarui shall pay all the consideration to Leshi Holding on the later of (i) 10 March 2017 or (ii) the date on which the above payment conditions are fulfilled (or waived). As of the Latest Practicable Date, Tianjin Jiarui had paid all of the consideration in accordance with the terms of the Leshi Pictures SP Agreement.

— 12 —

LETTER FROM THE BOARD

Completion and conditions precedent to completion

The transactions contemplated under the Leshi Pictures SP Agreement were conditional upon the Company having obtained all necessary approvals as required under the Listing Rules.

As the Company had obtained the written approval from Sunac International and no other approval was required to be obtained by the Company under the Listing Rules, such condition had been fulfilled and the registration of the transfer of the Leshi Pictures Interest was completed on 13 April 2017.

Upon completion of the transactions contemplated under the Leshi Pictures SP Agreement, Leshi Pictures was owned as to 15% by Tianjin Jiarui (or its designees) and became an associate of the Company.

Management rights

The new board of Leshi Pictures shall comprise seven directors. Tianjin Jiarui shall be entitled to nominate one director to the new board of Leshi Pictures, and Tianjin Jiarui shall be entitled to nominate one finance manager.

As at the Latest Practicable Date, the appointment of the relevant director and finance manager of Leshi Pictures as nominated by Tianjin Jiarui had been completed.

Undertakings

Leshi Holding and Mr. Jia undertake, among other things, to procure before 31 December 2017 (or such other date as may be agreed by the parties) the completion of the injection of all the equity interest in Leshi Pictures into Leshi Internet (unless the delay is caused by the CSRC or related regulatory authorities).

Based on the announcement published by Leshi Internet dated 25 August 2017, it was proposed that the material terms for injection of Leshi Pictures into Leshi Internet, which constituted a material asset restructuring of Leshi Internet subject to regulatory approval, would be adjusted. The adjustment was primarily caused by the change in shareholding structure of Leshi Pictures and possible increase in number of shareholders of Leshi Pictures and thus the number of transaction parties involved. The proposed adjustment to the material asset restructuring plan of Leshi Internet would involve, among other matters: a possible downward adjustment of the total consideration for the restructuring; a change to the valuation reference date for issuance of consideration shares by Leshi Internet; and adjustment to the total amount of gross proceeds to be raised by Leshi Internet. The adjusted restructuring proposal would be subject to approval by all relevant parties involved and the necessary audit, valuation, due diligence and documentation to be prepared based on the new transaction structure. In addition, as stated in Leshi Internet’s announcement dated 16 August 2017, Leshi Internet expected that the revised proposal for the material asset restructuring will be announced on or before 18 October 2017. Leshi Internet would regularly publish update announcements on the progress of the material asset restructuring.

— 13 —

LETTER FROM THE BOARD

As at the Latest Practicable Date, the injection of Leshi Pictures into Leshi Internet had not been completed. Based on Leshi Internet’s announcement dated 16 August 2017 and the undertakings given by Leshi Holding and Mr. Jia as mentioned above, subject to the revised material asset restructuring plan of Leshi Internet having been approved by its shareholders and the regulatory authorities, and barring unforeseen circumstances, the Company expects the injection of Leshi Pictures into Leshi Internet will proceed before 31 December 2017.

THE LESHI ZHIXIN SP AGREEMENTS AND THE LESHI ZHIXIN CAPITAL INCREASE AGREEMENT

Date

• 13 January 2017

Parties to the Leshi Zhixin SP Agreement A

• (i) Mr. Jia;

• (ii) Leshi Internet;

• (iii) Leshi Zhixin; and

• (iv) Tianjin Jiarui.

Parties to the Leshi Zhixin SP Agreement B

• (i) Mr. Jia;

• (ii) Xinle Asset;

• (iii) Leshi Zhixin; and

• (iv) Tianjin Jiarui.

Parties to the Leshi Zhixin Capital Increase Agreement

• (i) Mr. Jia;

• (ii) Leshi Zhixin; and

• (iii) Tianjin Jiarui.

To the best of the Directors’ knowledge, information and belief having made all reasonable enquires, each of Mr. Jia, Leshi Internet, Xinle Asset and Leshi Zhixin and their respective ultimate beneficial owners is independent of the Company and connected persons (as defined in the Listing Rules) of the Company.

— 14 —

LETTER FROM THE BOARD

Assets to be acquired

• (a) Under the Leshi Zhixin SP Agreement A, Leshi Internet conditionally agreed to sell, and Tianjin Jiarui (or its designees) conditionally agreed to acquire, 10.3964% equity interest in Leshi Zhixin (on a pre-capital increase basis).

• (b) Under the Leshi Zhixin SP Agreement B, Xinle Asset conditionally agreed to sell, and Tianjin Jiarui (or its designees) conditionally agreed to acquire, 15.7102% equity interest in Leshi Zhixin (on a pre-capital increase basis).

• (c) Under the Leshi Zhixin Capital Increase Agreement, Tianjin Jiarui (or its designees) conditionally agreed to subscribe for 10% equity interest in Leshi Zhixin (on a post-capital increase basis).

Therefore, Tianjin Jiarui (or its designees) would acquire in aggregate 33.4959% equity interest in Leshi Zhixin (on a post-capital increase basis).

Consideration

• (a) Under the Leshi Zhixin SP Agreement A, the consideration payable by Tianjin Jiarui to Leshi Internet for the 10.3964% equity interest in Leshi Zhixin (on a pre-capital increase basis) was RMB2,301,760,000.

• (b) Under the Leshi Zhixin SP Agreement B, the consideration payable by Tianjin Jiarui to Xinle Asset for the 15.7102% equity interest in Leshi Zhixin (on a pre-capital increase basis) was RMB2,648,240,000.

• (c) Under the Leshi Zhixin Capital Increase Agreement, Tianjin Jiarui conditionally agreed to contribute the capital of RMB3,000,000,000 to subscribe for equity interest in Leshi Zhixin, of which RMB 31,245,271 would be accounted for as the registered capital, representing 10% equity interest in Leshi Zhixin (on a post-capital increase basis) and the remaining balance of RMB 2,968,754,729 would be accounted for as capital reserve.

As a result, the total consideration was RMB7,950,000,000.

The consideration was arrived at after arm’s length negotiations between the parties principally with reference to the market value attributable to 33.4959% equity interest in Leshi Zhixin on a post-capital increase basis and taking into account of the Investment as a whole. The consideration implied a 25% discount to the valuation of 100% equity interest in Leshi Zhixin at approximately RMB31.8 billion with reference to the capital increase of Leshi Zhixin as announced by Leshi Internet on 14 January 2017 whereby certain investors subscribed for the increased registered capital of Leshi Zhixin at a total consideration of RMB1.83 billion in exchange for approximately 5.7493% equity interest in Leshi Zhixin.

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The consideration payable by Tianjin Jiarui for the relevant Leshi Zhixin Interest was paid by the proceeds of loans which were in turn funded by the internal resources of the Group to Tianjin Jiarui directly or indirectly by way of loans.

Payment of consideration and conditions precedent to payment of consideration

Payment of consideration for the relevant Leshi Zhixin Interest under the relevant Leshi Zhixin SP Agreements and the Leshi Zhixin Capital Increase Agreement was conditional upon and subject to the fulfillment (or waiver by Tianjin Jiarui) of the following conditions:

• (1) all the documents required for the transactions contemplated under the relevant Leshi Zhixin SP Agreement and the Leshi Zhixin Capital Increase Agreement (as the case may be) having been duly executed and remaining in effect;

• (2) (in the case of payment of consideration under the Leshi Zhixin SP Agreement A only) Leshi Internet having obtained all internal approval process required for the purposes of completing the transactions under the Leshi Zhixin SP Agreement A including board and shareholder approvals;

• (3) Leshi Zhixin having completed all the internal approval process required for the purposes of completing the transactions under the relevant Leshi Zhixin SP Agreement and the Leshi Zhixin Capital Increase Agreement (as the case may be) including board and shareholder approvals and waiver of pre-emptive right by other shareholders;

• (4) completion of the registration of the transfer of the relevant Leshi Zhixin Interest;

• (5) Tianjin Jiarui having completed its due diligence on Leshi Zhixin and related parties and there being no material deviation in the due diligence results from the disclosures provided to Tianjin Jiarui;

• (6) the representations and warranties of Leshi Internet or Xinle Asset or Leshi Zhixin (as the case may be) and Mr. Jia in the relevant Leshi Zhixin SP Agreement and the Leshi Zhixin Capital Increase Agreement (as the case may be) remaining true, accurate and complete;

• (7) there being no material adverse change (or impact) affecting the relevant Leshi Zhixin Interest or the performance of the relevant Leshi Zhixin SP Agreement or Leshi Zhixin Capital Increase Agreement (as the case may be); and

• (8) there being no litigation, arbitration, administrative proceedings, court judgment, governmental orders or law (i) prohibiting or restricting the transactions contemplated under the relevant Leshi Zhixin SP Agreement and the Leshi Zhixin Capital Increase Agreement, affecting completion thereof, or having material adverse impact thereon; (ii) whereby Tianjin Jiarui will be legally liable or subject to serious penalty as a result of

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completing the transactions contemplated under the relevant Leshi Zhixin SP Agreement or Leshi Zhixin Capital Increase Agreement (as the case may be) or (iii) restricting the operations of Tianjin Jiarui or Leshi Zhixin and thereby constituting a material adverse change.

Pursuant to the terms of the Leshi Zhixin SP Agreements, Tianjin Jiarui shall pay the consideration for the relevant Leshi Zhixin Interest on the later of (i) 30 April 2017 (in the case of the Leshi Zhixin SP Agreement A) or 10 March 2017 (in the case of the Leshi Zhixin SP Agreement B) or (ii) the date on which the above conditions precedent to payment of consideration are fulfilled (or waived). As for the Leshi Zhixin Capital Increase Agreement, Tianjin Jiarui shall make all payments for the capital increase by 15 June 2017. As at the Latest Practicable Date, Tianjin Jiarui had paid all of the consideration in accordance with the terms of the Leshi Zhixin SP Agreements and had made all payments for the capital increase under the Leshi Zhixin Capital Increase Agreement.

Completion and conditions precedent to completion

The transactions contemplated under the Leshi Zhixin SP Agreement A, Leshi Zhixin SP Agreement B and the Leshi Zhixin Capital Increase Agreement were conditional upon the Company having obtained all necessary approvals as required under the Listing Rules.

Pursuant to the terms of the Leshi Zhixin SP Agreements and the Leshi Zhixin Capital Increase Agreement, Leshi Internet or Xinle Asset or Leshi Zhixin (as the case may be) and Mr. Jia shall arrange for the registration of the transfer of the relevant Leshi Zhixin Interest or registration of capital increase (as the case may be) to be completed (1) before 15 March 2017 (in the case of the Leshi Zhixin SP Agreement A); (2) before 26 January 2017 (in the case of the Leshi Zhixin SP Agreement B); and (3) before 15 March 2017 (in the case of the Leshi Zhixin Capital Increase Agreement).

As the Company had obtained the written approval from Sunac International and no other approval was required to be obtained by the Company under the Listing Rules, the conditions precedent to completion had been fulfilled and the registration of the transfer of the Leshi Zhixin Interest under the Leshi Zhixin SP Agreement A was completed on 7 March 2017, the registration of the transfer of the Leshi Zhixin Interest under the Leshi Zhixin SP Agreement B was completed on 7 March 2017 and the registration of the capital increase under the Leshi Zhixin Capital Increase Agreement was completed on 9 March 2017.

Management rights

Pursuant to the terms of the Leshi Zhixin SP Agreement B, the board of Leshi Zhixin shall comprise three directors. Tianjin Jiarui shall be entitled to nominate one director to the board of Leshi Zhixin, and Tianjin Jiarui shall be entitled to nominate one finance manager for Leshi Zhixin.

As at the Latest Practicable Date, the appointment of the relevant director and finance manager of Leshi Zhixin as nominated by Tianjin Jiarui had been completed.

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LETTER FROM THE BOARD

Undertakings

Pursuant to the terms of the Leshi Zhixin SP Agreements and the Leshi Zhixin Capital Increase Agreement, Leshi Internet or Xinle Asset or Leshi Zhixin (as the case may be) and Mr. Jia, undertake, among other things, to procure (i) the completion of filing with the CSRC regarding the reorganization of the equity interest in Leshi Zhixin not held by Leshi Internet into Leshi Internet before 31 December 2019; and (ii) the reorganization of the equity interest in Leshi Zhixin not held by Leshi Internet into Leshi Internet before 30 September 2020 (or such other date as may be agreed by the parties) unless the delay is caused by the CSRC or related regulatory authorities. As at the Latest Practicable Date, the filing with the CSRC and the reorganization of Leshi Zhixin had not yet been consummated.

Strategic cooperation

The parties undertook that they would make full use of their respective resources to carry out all-round cooperation in areas including but not limited to intelligent hardware, the Internet, real estate, smart home, intelligent community so as to further consolidate both parties’ leading positions in their respective industries. The Company will become the sole partner of Leshi Companies in real estate sector. The parties will carry out all-round cooperation in the real estate industry (including but not limited to the film and television industry, automobile industry, sports industry and Internet ecology) to leverage their respective advantages and achieve win-win. Meanwhile, the relevant parties undertake to Tianjin Jiarui that upon completion of the Investment, Tianjian Jiarui would have the Priority Investment Rights with respect to other shares of Leshi Companies.

INFORMATION ON THE TARGET COMPANIES

Background information of the Target Companies

Leshi Internet

Leshi Internet is a limited company established in the PRC in 2004. Leshi Internet has the PRC’s leading Internet content copyright library, content production capacity and cloud video platform and owns a controlling stake in the largest smart TV company in the PRC. It has built a unique Internet video ecological system of “platform+content+hardware+software+application”.

Leshi Pictures

Leshi Pictures is a company established in the PRC with limited liability in 2011 whose principal business activity is film production, film publicity and release, copyright operations and business development.

In 2016, Leshi Pictures participated in a total of 11 movies, including by means of investment, production, distribution, etc., with the total box office of over HK$100 million for each film, ranking first in the industry in respect of the number of movies with the total box office of over HK$100

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million. Leshi Pictures received the total box office of HK$3.95 billion for its participation in the 11 movies, ranking second in the industry. It recorded an increase of 73.7% in the total box office compared with the HK$2.274 billion in 2015, becoming the fastest growing company in the industry.

Leshi Zhixin

Leshi Zhixin is a subsidiary of Leshi Internet, a listed company, and is engaged in the business of the research and development, production and sales of intelligent Internet TV under the brand of Leshi Super TV and carries the big screen ecological business of Leshi Internet. Since the launch of Super TV in the market, as of the end of 2016, users of Leshi big screen had exceeded 10 million, which truly realized the coverage of 10 million home users and formed extremely strong user viscosity. Currently, Leshi Super TV has entered the first camp for TV sales brands and is the first brand for intelligent TV. In the future, with the continued hot sales of Super TV and backing by the rich video content of Leshi Internet, Leshi Zhixin will conduct a variety of businesses such as advertising operations, online distribution, application distribution, big screen games and big screen shopping based on high performance big screen intelligent TV and large user groups and realize profits by diversified means.

Financial information of the Target Companies

Leshi Internet

The audited combined net assets value of Leshi Internet as at 31 December 2016 was RMB10,316,511,837.32. The audited combined financial information of Leshi Internet for the years ended 31 December 2015 and 2016 was as follows:

	For the year	For the year
	ended 31	ended 31
	December 2015	December 2016
	RMB	RMB
Net profit/(loss) (before taxation and extraordinary
items)	74,169,222.09	(328,708,520.87)
Net profit/(loss) (after taxation and extraordinary items)	198,991,537.24	(232,495,242.80)

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LETTER FROM THE BOARD

Leshi Pictures

The audited combined net assets value of Leshi Pictures as at 31 December 2016 was RMB2,259,043,431.15. The unaudited combined financial information of Leshi Pictures for the year ended 31 December 2015 and the audited combined financial information of Leshi Pictures for the year ended 31 December 2016 was as follows:

	For the year	For the year
	ended 31	ended 31
	December 2015	December 2016
	RMB	RMB
	(unaudited)
Net profit/(loss) (before taxation and extraordinary
items)	(102,009,375.56)	182,439,161.60
Net profit (after taxation and extraordinary items)	128,166,992.74	145,524,360.23

Leshi Zhixin

The audited combined net liabilities of Leshi Zhixin as at 31 December 2016 was RMB799,987,140.57. The audited combined financial information of Leshi Zhixin for the years ended 31 December 2015 and 2016 was as follows:

	For the year	For the year
	ended 31	ended 31
	December 2015	December 2016
	RMB	RMB
Net profit/(loss) (before taxation and
extraordinary items)	(974,003,684.05)	(855,366,552.05)
Net profit/(loss) (after taxation and extraordinary items)	(730,518,771.38)	(635,656,753.31)

FINANCIAL EFFECTS OF THE INVESTMENT

Based on the annual report of the Group for the year ended 31 December 2016, as at 31 December 2016, the Group had total assets, total liabilities and net assets of approximately RMB293,183.1 million, RMB257,771.9 million and RMB35,411.2 million respectively. Based on the unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group as set out in Appendix V to this circular, the Investment would not result in any change in total assets, total liabilities or net assets of the Group.

Based on the growth prospects of the Target Companies primarily with regard to (i) the market leading database of copyright Internet content, production capability and cloud video streaming platform of Leshi Internet; (ii) the rise of Leshi Zhixin into the first-tier league for branded Internet TVs; and (iii) the 11 movies invested by Leshi Pictures in 2016, all of which had achieved box office

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sales in excess of HK$100 million, as well as the cash dividend declared by Leshi Internet for each of the three years ended 31 December 2016 amounting to approximately RMB38.7 million, RMB57.5 million and RMB55.9 million respectively, the Company believes that the Investment would have a positive impact on the profits of the Group in the long term. As the consideration payable by the Group for the Investment was paid to the respective counterparties, the Directors believe that the Investment would have negative impact to the cashflow in the short term. In addition, given that the Investment in the Target Companies are accounted for using the equity method and the assets and liabilities of the Target Companies will not be consolidated into the consolidated financial statements of the Group, the Investment would have no material impact on the gearing ratio of the Group.

Affected by the debt related issues of other Leshi Companies not invested by the Group, and with reference to the half-year report of Leshi Internet for the six months ended 30 June 2017, the operating results of Leshi Internet (including Leshi Zhixin) for the six months ended 30 June 2017 had shown a drop in revenue and a net loss attributable to equity owners as compared to the same period of last year, and the Group expects to record investment loss by equity method and make corresponding impairment provision for investment in Leshi Internet and Leshi Zhixin for the sake of prudence. The above-mentioned investment loss and impairment provision will be reflected in the unaudited consolidated interim results of the Group for the six months ended 30 June 2017. The Directors consider that the recognition of such investment loss and impairment provision are affected mainly by unfavorable factors as highlighted above, and does not change the judgement on the long-term investment value of the Target Companies.

For details of the unaudited pro forma financial information on the Enlarged Group following completion of the Acquisition, please refer to Appendix V to this circular.

DIAGRAM OF THE TRANSACTIONS CONTEMPLATED UNDER THE ACQUISITION

The following simplified diagram illustrates the transactions contemplated under the Acquisition Agreements:

Immediately before the Acquisition:

==> picture [322 x 136] intentionally omitted <==

----- Start of picture text -----

Mr. Jia
0.6%
34.46% 92.07%
Leshi Internet
Xinle Asset Leshi Holding
(300104.SZ)
17.9076% 20.4228% 43.38%
Leshi Zhixin Leshi Pictures
55.1873%
----- End of picture text -----

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LETTER FROM THE BOARD

Immediately after the Acquisition:

==> picture [401 x 240] intentionally omitted <==

----- Start of picture text -----

Mr. Wang Mr. Zheng
50% 50%
Tianjin Yingrui
100%
Tianjin Jiarui
8.61% (Note)
Mr. Jia
0.6% 92.07%
25.84% (Note) Xinle Asset Leshi Holding
Leshi Internet
1.9777% 21.8123% 15%
(300104.SZ)
18.3805%
33.4959% Leshi Pictures
Leshi Zhixin
40.3118%
----- End of picture text -----

Note: Leshi Internet issued 13,039,969 new shares on 22 March 2017 which resulted in dilution of the shareholding interest of Mr. Jia and Tianjin Jiarui from approximately 25.84% to approximately 25.67% and from approximately 8.61% to approximately 8.56%, respectively.

INFORMATION ON THE CONTRACTUAL ARRANGEMENTS

Introduction

Leshi Internet is engaged in advertising services based on the whole network video industry (the video platform advertising), terminal services (i.e., revenue from intelligent terminal products sold by the company), membership and distribution services (including revenue from paid offerings, copyright services and teleplay release) and other services (i.e., those services that generate less revenue and have not been built up to enough scale, such as cloud video platform services and technological development services). Leshi Pictures is engaged in film production, film publicity and release, copyright operations and business development, and Leshi Zhixin is engaged in the business of Le TV terminal services.

According to the applicable laws and regulations of the PRC, there are restrictions on foreign investment in certain businesses in the existing business and the future business of Leshi Internet, Leshi Pictures and Leshi Zhixin. For those areas where foreign investment is prohibited according to the Foreign Investment Guidance Catalogue 《外商投資指導目錄》( ), foreign investors or their foreign-invested enterprises established in the PRC shall not invest. As such, the Group invested in such businesses through the Contractual Arrangements.

The Contractual Arrangements entered into by Sunac Real Estate are: (i) the Exclusive Technology Consulting and Services Agreement; (ii) the Entrustment Agreements; (iii) the Exclusive Option Agreements; (iv) the Loan Agreements; (v) the Equity Pledge Agreements; and (vi) the confirmation letters from the spouses of the Registered Shareholders.

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The Company’s PRC Legal Adviser is of the opinion that except certain terms of the Contractual Arrangements as set out in the paragraph headed “Risks relating to the Investment — Certain terms of the Contractual Arrangements may not be enforceable under PRC laws” below, the Contractual Arrangements entered into by Sunac Real Estate are legally binding on and enforceable against each party of each of the agreements in accordance with their terms and provisions under PRC laws and regulations. The Directors therefore believe that save as disclosed, the Contractual Arrangements are enforceable under the relevant laws and regulations in the PRC, and that the Contractual Arrangements provide a mechanism that protects Sunac Real Estate in its acquisition of the economic interest over the relevant Target Shares.

The following simplified diagram illustrates the flow of economic benefits in the Target Shares from Tianjin Jiarui to Sunac Real Estate stipulated under the Contractual Arrangements as at the Latest Practicable Date:

==> picture [397 x 245] intentionally omitted <==

----- Start of picture text -----

Company
Offshore
Onshore
Contractual
Arrangements
Mr. Wang Mr. Zheng
50% 50%
100%
Sunac Real Tianjin Yingrui
Contractual
Estate
100%
Arrangements
Tianjin Jiarui
8.56% (Note) 15% 33.4959%
Leshi Internet Leshi Pictures Leshi Zhixin
----- End of picture text -----

Note: Leshi Internet issued 13,039,969 new shares on 22 March 2017 which resulted in dilution of Tianjin Jiarui’s shareholding interest in Leshi Internet from approximately 8.61% to approximately 8.56%.

(i) Exclusive Technology Consulting and Services Agreement

Sunac Real Estate and Tianjin Jiarui entered into the Exclusive Technology Consulting and Services Agreement, pursuant to which Tianjin Jiarui agrees to engage Sunac Real Estate as its exclusive consultant and service provider. Accordingly, Sunac Real Estate shall provide advice and recommendations to Tianjin Jiarui in respect of, among others, (i) consulting services on the management and operations of Tianjin Jiarui; (ii) consulting services on market research and marketing strategies; (iii) technical consulting services on processor maintenance and internet platform operating strategies; (iv) services on research and development of software products and

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system maintenance; (v) leasing of computers and other operating equipment to Tianjin Jiarui; (vi) services on brand promotion and management; (vii) authorising Tianjin Jiarui to use all of Sunac Real Estate’s intellectual property on a non-exclusive basis during the course of its business; and (viii) provision of human resources support and relevant technical personnel.

Pursuant to the Exclusive Technology Consulting and Services Agreement, Tianjin Jiarui shall pay to Sunac Real Estate a service fee. Subject to the provisions of PRC laws and regulations, the amount is equal to the income of Tianjin Jiarui (including bonus, dividend distribution or any other proceeds or benefits received by Tianjin Jiarui from its investees), after making up for the losses for the previous year (if necessary) and deducting the necessary costs, expenses and taxes required for the business operation, and Sunac Real Estate shall have the right to adjust the level of the service fee based on the actual service scope and with reference to the operating conditions and expansion needs of Tianjin Jiarui. Tianjin Jiarui shall agree to pay the service fee quarterly.

The Exclusive Technology Consulting and Services Agreement is for an initial term of ten years commencing from the date of the agreement, upon the expiry of which the term of the agreement will be extended automatically for another ten years, unless Sunac Real State informs Tianjin Jiarui 90 days prior to the expiry date that it will not extend the term. Furthermore, the agreement may be terminated (i) by Sunac Real Estate by giving a 30 days’ prior notice of termination; or (ii) upon the acquisition of the entire equity interests in, and/or all assets of, Tianjin Jiarui by Sunac Real Estate pursuant to the Exclusive Option Agreement. Tianjin Jiarui is not contractually entitled to terminate the Exclusive Technology Consulting and Services Agreement.

(ii) Entrustment Agreements

Sunac Real Estate, Tianjin Yingrui and the Registered Shareholders entered into an entrustment agreement, pursuant to which the Registered Shareholders agree to enter into powers of attorney to irrevocably authorise the Chinese citizens designated by Sunac Real Estate (who shall be the directors and their successors of the direct or indirect shareholders of Sunac Real Estate (except the Registered Shareholders themselves) and who shall not be associates (as defined in the Listing Rules) of the Registered Shareholders) (the “ Designated Persons ”) to exercise all of their rights and powers as shareholders of Tianjin Yingrui. The Designated Persons will act on the Registered Shareholders’ behalf on all matters pertaining to Tianjin Yingrui and, to the extent permissible under applicable PRC laws, exercise all of their respective rights as a shareholder thereof, including (i) rights to attend shareholders’ meeting; (ii) rights to exercise voting rights in a shareholders’ meeting on shareholder matters including but not limited to appointment or removal of directors, supervisors and senior management of Tianjin Yingrui and winding up of Tianjin Yingrui; (iii) rights to sign minutes or resolutions of shareholders’ meetings or other legal documents; (iv) rights to instruct directors or the legal representative of Tianjin Yingrui to act in accordance with all their instructions; (v) rights to file documents with relevant governmental authorities or regulatory bodies; (vi) rights to decide any transfer or otherwise disposal of the equity interest of the Registered Shareholders in Tianjin Yingrui; and (vii) such other shareholders’ rights as stipulated under applicable PRC laws, rules and regulations and the articles of association of Tianjin Yingrui.

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Sunac Real Estate, Tianjin Jiarui and Tianjin Yingrui also entered into an entrustment agreement pursuant to which Tianjin Yingrui agreed to enter into powers of attorney to irrevocably authorise the Chinese citizens designated by Sunac Real Estate (who shall be the directors and their successors of the direct or indirect shareholders of Sunac Real Estate who shall not be associates (as defined in the Listing Rules) of Tianjin Yingrui) to exercise all of its rights and powers as shareholder of Tianjin Jiarui. Such designated persons will have similar shareholder rights set out in the preceding paragraph with respect to Tianjin Jiarui.

Each of the Entrustment Agreements is for an indefinite term commencing from the date of the agreement until it is terminated (i) by Sunac Real Estate by giving a 30 days’ prior notice of termination; or (ii) upon the acquisition of the entire equity interests in, and/or all assets of, Tianjin Yingrui or Tianjin Jiarui (as the case may be) by Sunac Real Estate pursuant to the Exclusive Option Agreements. The Registered Shareholders, Tianjin Yingrui and Tianjin Jiarui are not contractually entitled to terminate the Entrustment Agreements.

(iii) Exclusive Option Agreements

Sunac Real Estate, Tianjin Yingrui and the Registered Shareholders entered into an exclusive option agreement, pursuant to which the Registered Shareholders and/or Tianjin Yingrui irrevocably grant to Sunac Real Estate or the person as designated by Sunac Real Estate exclusive options to purchase, to the extent permitted by PRC laws and regulations, their equity interests in Tianjin Yingrui, entirely or partially, at the minimum purchase price permitted by PRC laws and regulations. In addition, pursuant to the Exclusive Option Agreement, the Registered Shareholders and Tianjin Yingrui irrevocably grant to Sunac Real Estate or the person as designated by Sunac Real Estate, exclusive options to acquire, to the extent permitted by PRC laws and regulations, all or part of the assets of Tianjin Yingrui (including but not limited to the entire equity interest in Tianjin Jiarui) at the net book value for each option or the minimum purchase price permitted under PRC laws and regulations (whichever is lower). Sunac Real Estate may exercise such options at any time until it or the person designated by it has acquired all equity interests or assets of Tianjin Yingrui or unilaterally terminated the Exclusive Option Agreement by giving 30 days’ prior notice, subject to the applicable PRC laws and regulations.

Sunac Real Estate and Tianjin Jiarui also entered into an exclusive option agreement, pursuant to which Tianjin Jiarui agreed to grant to Sunac Real Estate the exclusive options. To the extent permitted by the PRC laws and regulations, Sunac Real Estate and/or one or more of its designated persons are entitled to purchase from time to time the exclusive rights of all or part of the equity interests/shares in a company held by Tianjin Jiarui currently and in the future (including the equity interests/shares (if any) held by Tianjin Jiarui after the capital increase of the relevant company, including but not limited to the shares of Leshi Internet, the equity interests of Leshi Zhixin and the equity interests of Leshi Pictures, which may be held by Tianjin Jiarui in the future). Sunac Real Estate intends to accept such grant. Sunac Real Estate has the right to require Tianjin Jiarui to pledge its purchased equity interests/shares held by it to Sunac Real Estate or its designated persons to secure the borrowings provided by Sunac Real Estate to Tianjin Jiarui (if any).

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The Exclusive Option Agreement is for an indefinite term commencing from the date of the agreement, until it is terminated (i) by Sunac Real Estate by giving a 30 days’ prior notice of termination; or (ii) upon the acquisition of the entire equity interests or all assets of, Tianjin Yingrui by Sunac Real Estate or the person designated by it pursuant to the Exclusive Option Agreement. Tianjin Yingrui, the Registered Shareholders and/or Tianjin Yingrui are not contractually entitled to terminate the Exclusive Option Agreement.

(iv) Loan Agreements

Sunac Real Estate entered into the Loan Agreements with each of the Registered Shareholders respectively pursuant to which Sunac Real Estate shall provide a non-interest-bearing loan of RMB5,000,000 to each of the Registered Shareholders for the purposes of capital injection into Tianjin Yingrui. Subject to the terms of the Loan Agreements, the loan shall be for a term of five years commencing from the date of the agreement, upon the expiry of which the term of the agreement will be extended automatically for another five years. During the term of the Loan Agreements, Sunac Real Estate may demand immediate repayment upon the occurrence of certain events set out in the Loan Agreements including the resignation or removal of the Registered Shareholders from office in Sunac Real Estate or its affiliates, the death of the Registered Shareholders, the commission of criminal offences by the Registered Shareholders and the exercise of Sunac Real Estate’s right under the Exclusive Option Agreement. When the loan is due, the Registered Shareholders may only repay the loan either by (i) transferring its interest in Tianjin Yingrui to Sunac Real Estate or the person as designated by Sunac Real Estate in accordance with Sunac Real Estate’s requirements and to the extent permitted by PRC laws and regulations, or (ii) upon the exercise of Sunac Real Estate’s right under the Exclusive Option Agreement to acquire the assets of Tianjin Yingrui, using the dividends or other distributions obtained by the Registered Shareholders from Tianjin Yingrui.

The obligations of the Registered Shareholders under the Loan Agreements are secured by the pledge over all the equity interest held by the Registered Shareholders in Tianjin Yingrui in favour of Sunac Real Estate under the relevant Equity Pledge Agreement.

(v) Equity Pledge Agreements

Sunac Real Estate and the Registered Shareholders entered into an equity pledge Agreement, pursuant to which the Registered Shareholders shall pledge all of their respective equity interests in Tianjin Yingrui to Sunac Real Estate to secure the performance of all their obligations and the obligations of Tianjin Yingrui and Tianjin Jiarui under the Contractual Arrangements. Under the agreement, if any of the Registered Shareholders and/or Tianjin Yingrui and/or Tianjin Jiarui breaches any obligation under the Contractual Arrangements, Sunac Real Estate, as the pledgee, is entitled to request the Registered Shareholders to transfer the pledged equity interests, entirely or partially to Sunac Real Estate and/or any entity or person as designated by Sunac Real Estate. In addition, pursuant to the Equity Pledge Agreement, each of the Registered Shareholders undertakes to Sunac Real Estate, among other things, not to transfer the interest in his respective equity interests in Tianjin Yingrui and not to create any pledge thereon without Sunac Real Estate’s prior written consent.

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Sunac Real Estate and Tianjin Yingrui also entered into an equity pledge agreement pursuant to which Tianjin Yingrui shall pledge all of its equity interests in Tianjin Jiarui to Sunac Real Estate to secure the performance of all the obligations of Tianjin Yingrui, Tianjin Jiarui and the Registered Shareholders under the Contractual Arrangements, on terms similar to those set out in the preceding paragraph.

Each of the Equity Pledge Agreements is for an indefinite term commencing on the date of the agreement until (i) all the relevant obligations under the Contractual Arrangements have been fulfilled; (ii) all the relevant debts under the Contractual Arrangements have been settled; or (iii) it is terminated by Sunac Real Estate by giving a 30 days’ prior notice of termination. The Registered Shareholders and Tianjin Yingrui (as the case may be) are not contractually entitled to terminate the Equity Pledge Agreements.

(vi) Confirmation letters from the spouse of each Registered Shareholder

The spouse of each Registered Shareholder unconditionally and irrevocably agreed to and confirmed the transaction documents under the Contractual Arrangements signed by the relevant Registered Shareholder, and agreed to dispose of the equity interest in Tianjin Yingrui held by the relevant Registered Shareholder according to the requirements of such documents. The spouse of each Registered Shareholder also unconditionally and irrevocably agreed that such equity interest and all interests related thereto were not matrimonial properties jointly owned by him/her with the relevant Registered Shareholder, such equity interest and all interests related thereto were personal properties of the relevant Registered Shareholder, and might be pledged, sold or otherwise disposed of according to the requirements of the relevant transaction documents, and consent from the relevant spouse was not necessary. The spouse of each Registered Shareholder undertook that he/she will not assert any right or interest, or claim any damages or right, on such equity interest and all interests related thereto under any circumstances.

Manner of settlement of disputes which may arise from the Contractual Arrangements

Pursuant to the Contractual Arrangements, any dispute arising from the interpretation and implementation of the Contractual Arrangements between the parties should first be resolved through negotiation, failing which any party may submit the said dispute to the China International Economic and Trade Arbitration Commission (“ CIETAC ”) with a view to resolving the dispute through arbitration in accordance with the arbitration rules of the CIETAC. The results of the arbitration shall be final and binding on all relevant parties.

The Company’s PRC Legal Adviser confirmed that the abovementioned proposed dispute resolution provisions set forth in the Contractual Arrangements are in compliance with the PRC laws, legally valid and binding on the relevant signatories. However, the Company’s PRC Legal Adviser is also of the opinion that the provisions in the agreements underlying the Contractual Arrangements setting forth that courts in Hong Kong and the Cayman Islands are empowered to grant interim remedies in support of the arbitration pending the formation of an arbitral tribunal may not be enforceable under PRC laws, see the paragraph headed “Risks Relating to the Investment — Certain terms of the Contractual Arrangements may not be enforceable under PRC laws” below.

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RISKS RELATING TO THE INVESTMENT

If the PRC Government finds that the structure of the Investment does not comply with applicable PRC laws and regulations, or if these regulations or their interpretations change in the future, the Investment could be subject to severe consequences, including the nullification of the Contractual Arrangements and the relinquishment of Sunac Real Estate’s interest in the Target Shares.

Some of the businesses in the existing businesses and future intended businesses of Leshi Internet, Leshi Pictures and Leshi Zhixin have entry barriers for foreign investors, the specific details are as follows:

• (a) In respect of Leshi Internet, among the current principal businesses operated by Leshi Internet, the internet publishing service, internet audio and visual program service, internet culture operation service and television broadcast program production and operation business belong to prohibited categories of the industries for foreign investments in the “Foreign Investment Guidance Catalogue”(《外商投資指導目錄》).

• (b) In respect of Leshi Pictures, among the current principal businesses operated by Leshi Pictures, the film distribution and television broadcast program production and operation business belong to prohibited categories of the industries for foreign investments in the “Foreign Investment Guidance Catalogue”(《外商投資指導目錄》).

• (c) In respect of Leshi Zhixin, in the scope of operation by Leshi Zhixin, the businesses engaging in internet culture activities, research and development and production of internet games, online operation of internet games, and operation of game products via the internet (including the issue of virtual currency for internet games and trading of virtual currency) are internet culture operation services, whereas the internet television business intended for continuous development by Leshi Zhixin in future is an internet audio and visual program service. Both internet culture services and internet audio and visual program service belong to prohibited categories of industries for foreign investments in the “Foreign Investment Guidance Catalogue” 《外商投資指導目錄》( ).

According to the requirements of Article 4 under the “Rules on Merger and Acquisition of Domestic Enterprises by Foreign Investors” 《關於外國投資者併購境內企業的規定》( )”, for industries prohibited to be operated by foreign investors under the “Foreign Investment Guidance Catalogue” (《外商投資指導目錄》), foreign investors are not allowed to merge with or acquire enterprises engaging in such industries. According to the requirements of Article 3 under the “Provisional Rules on Domestic Investments made by Foreign-invested Enterprises” 《關於外商投資企業境內投資的暫( 行規定》), domestic investments made by foreign-invested enterprises shall be implemented in line with the requirements of the “Provisional Rules on Guidance for Foreign Investment Direction” 《指( 導外商投資方向暫行規定》) and “Foreign Investment Guidance Catalogue” 《外商投資指導目錄》( ), foreign-invested enterprises are prohibited to invest in sectors where foreign investment is forbidden.

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To summarize the aforesaid, some of the businesses in the existing businesses and future intended businesses of Leshi Internet, Leshi Pictures and Leshi Zhixin involved in the transactions have entry barriers for foreign investors, and foreign investors or foreign-invested enterprises established by them within the PRC shall not invest in sectors which belong to prohibited areas for foreign investments under the “Foreign Investment Guidance Catalogue” 《外商投資指導目錄》( ). Therefore, the Group will invest in such businesses through the Contractual Arrangements. Although the Group does not have any equity interest in Tianjin Jiarui, the Group can obtain substantially all economic benefits of the relevant Target Shares through the Contractual Arrangements with Tianjin Yingrui and/or Tianjin Jiarui and/or the Registered Shareholders through Sunac Real Estate.

The Company’s PRC Legal Adviser is of the opinion that (i) the above arrangements will not violate existing PRC laws and regulations; (ii) the agreements under the Contractual Arrangements have been duly executed and delivered, which are legally binding on the signing parties, and the execution and performance of the agreements under the Contractual Arrangements do not violate the existing PRC laws and regulations and the articles of association of the signing parties. Save for the equity pledge under the Equity Pledge Agreements, the execution and effectiveness of the agreements under the Contractual Arrangements do not require the approvals, consent or other legal procedures of the PRC Government authorities. When the registration of the equity pledge is duly completed, the equity pledge under the Equity Pledge Agreements will have legal effect; (iii) except for certain terms of the Contractual Arrangements regarding the power of courts in Hong Kong and the Cayman Islands to grant interim remedies in support of the arbitration pending the formation of an arbitral tribunal (see the sub-paragraph headed “Certain terms of the Contractual Arrangements may not be enforceable under PRC laws” below), the Contractual Arrangements entered into by Tianjin Yingrui and Tianjin Jiarui are valid and legally binding and will not result in any violation of existing PRC laws and regulations; and (iv) the Contractual Arrangements entered into by Tianjin Yingrui and Tianjin Jiarui do not exist any situations that the contracts become invalid under Section 52 of the PRC Contract Law (including, without limitation, “concealing illegal intentions with a lawful form”). Under the existing effective laws and regulations, the contracts entered into thereunder will not be regarded as invalid. However, the Company cannot guarantee that the views of the PRC Government will be consistent with or similar to those of the Company’s PRC legal advisers. Furthermore, the PRC Government may adopt new laws and regulations in the future, which may invalidate the Contractual Arrangements.

If the PRC Government or judicial authorities determines that any of the relevant Target Companies, Tianjin Yingrui and Tianjin Jiarui or the Contractual Arrangements does not comply with applicable laws and regulations, it could have broad discretion in dealing with such incompliance, including:

1. requiring the nullification of the Contractual Arrangements;

2. levying fines and/or confiscating the proceeds generated from the operations under the Contractual Arrangements;

3. revocation of the business licenses or operating licenses of Tianjin Jiarui, Tianjin Yingrui, the Target Companies and/or Sunac Real Estate;

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1. discontinuing or placing restrictions or onerous conditions on the business operations of the Target Companies, Tianjin Yingrui and/or Tianjin Jiarui and/or Sunac Real Estate;

2. imposing conditions or requirements which the relevant Target Companies and/or Tianjin Yingrui and/or Tianjin Jiarui may not be able to comply with or satisfy;

3. requiring the relevant Target Companies and/or Tianjin Yingrui and/or Tianjin Jiarui to undergo a costly and disruptive restructuring; and

4. taking other regulatory or enforcement actions that could be harmful to or even shut down the business.

The imposition of any of the above-mentioned consequences could result in a material and adverse effect on the relevant Target Company’s or Tianjin Yingrui’s or Tianjin Jiarui’s ability to conduct its business. In addition, if the imposition of any of these consequences causes Sunac Real Estate to lose its rights to receive its economic benefits arising from the relevant Target Shares, the financial results of the relevant Target Companies as well as the Group’s Investment in the relevant Target Companies may be adversely affected.

Sunac Real Estate relies on the Contractual Arrangements to obtain the economic benefits of the relevant Target Shares which may not be as effective in obtaining the economic benefits as direct ownership.

Due to the PRC’s legal restrictions on foreign investment in the business conducted by the Target Companies as mentioned above, the Group, through Sunac Real Estate, obtains the economic benefits of the relevant Target Shares through the Contractual Arrangements rather than equity ownership.

However, the Contractual Arrangements may not be as effective in obtaining the economic benefits of the relevant Target Shares as equity ownership. For example, Tianjin Yingrui and/or Tianjin Jiarui and/or the Registered Shareholders could breach or fail to perform their obligations under the Contractual Arrangements. If Sunac Real Estate had direct ownership of Tianjin Yingrui and/or Tranjin Jiarui and/or the Target Companies, Sunac Real Estate would be able to exercise its rights as a shareholder to effect changes in its board of directors, which in turn could effect changes, subject to any applicable fiduciary obligations, at the management and operational level. Under the Contractual Arrangements, Sunac Real Estate would need to rely on its rights under the Contractual Arrangements to effect such changes, or designate new shareholders of Tianjin Yingrui and/or Tianjin Jiarui under the Contractual Arrangements.

If Tianjin Yingrui and/or Tianjin Jiarui and/or the Registered Shareholders breach their obligations under the Contractual Arrangements or if Sunac Real Estate loses the economic benefits over the relevant Target Shares for any reason, Sunac Real Estate would need to bring a claim against them under the terms of the Contractual Arrangements. The Contractual Arrangements are governed by the PRC law and provide that any dispute arising from these arrangements will be submitted to the China International Economic and Trade Arbitration Commission, or the CIETAC, for arbitration, the ruling of which will be final and binding. Furthermore, personal liabilities of the shareholders of Tianjin Yingrui and/or Tianjin Jiarui may also subject the equity interest they hold in Tianjin Yingrui

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and/or Tianjin Jiarui to court preservation actions or enforcement. The legal framework and system in the PRC, particularly those relating to arbitration proceedings, is not as developed as other jurisdictions such as Hong Kong or the United States of America. As a result, significant uncertainties relating to the enforcement of legal rights through arbitration, litigation and other legal proceedings remain in the PRC, which could limit Sunac Real Estate’s ability to enforce the Contractual Arrangements and obtain economic interest of the relevant Target Shares. If Tianjin Yingrui and/or Tianjin Jiarui and/or the Registered Shareholders fails to perform its respective obligations under the Contractual Arrangements, and Sunac Real Estate is unable to enforce the Contractual Arrangements, or suffer significant delay or other obstacles in the process of enforcing the Contractual Arrangements, the Group’s Investment in the relevant Target Companies could also be materially and adversely affected.

Certain terms of the Contractual Arrangements may not be enforceable under PRC laws.

The Contractual Arrangements provide for dispute resolution by way of arbitration in accordance with the arbitration rules of the CIETAC in the PRC. The Contractual Arrangements contain provisions to the effect that the arbitral body may award remedies over the shares and/or assets of Tianjin Yingrui and/or Tianjin Jiarui, injunctive relief and/or winding up of Tianjin Yingrui and/or Tianjin Jiarui. In addition, the Contractual Arrangements contain provisions to the effect that courts in Hong Kong and the Cayman Islands are empowered to grant interim remedies in support of the arbitration pending the formation of an arbitral tribunal.

However, the Company’s PRC Legal Adviser has advised that the abovementioned provisions contained in the Contractual Arrangements may not be enforceable. Under PRC laws, an arbitral body does not have the power to grant any injunctive relief or provisional or final liquidation order to preserve the assets of or any equity interest in Tianjin Yingrui and/or Tianjin Jiarui in case of disputes. Therefore, such remedies may not be available to Sunac Real Estate, notwithstanding the relevant contractual provisions contained in the Contractual Arrangements. PRC laws allow an arbitral body to award the transfer of assets of or an equity interest in Tianjin Yingrui and/or Tianjin Jiarui in favour of an aggrieved party. In the event of non-compliance with such award, enforcement measures may be sought from the court. However, the court may or may not support the award of an arbitral body when deciding whether to take enforcement measures. Under PRC laws, courts of judicial authorities in the PRC generally would not grant injunctive relief or the winding-up order against Tianjin Yingrui and/or Tianjin Jiarui as interim remedies to preserve the assets or shares in favour of any aggrieved party. The Company’s PRC Legal Adviser is also of the view that, even though the Contractual Arrangements provide that courts in Hong Kong and the Cayman Islands may grant and/or enforce interim remedies or in support of arbitration, such interim remedies (even if so granted by courts in Hong Kong or the Cayman Islands in favour of an aggrieved party) may not be recognized or enforced by PRC courts. As a result, in the event that Tianjin Yingrui and/or Tianjin Jiarui and/or the Registered Shareholders breaches any of the Contractual Arrangements, Sunac Real Estate may not be able to obtain sufficient remedies in a timely manner, and its economic interest in the relevant Target Shares could be materially and adversely affected.

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The Contractual Arrangements may lead to an increase in the overall future tax burden of the Group due to factors such as consolidation adjustment or a change in the structure of the Contractual Arrangements. The Group will continue to pay close attention to this.

INSURANCE

Taking into account the fact that the Group will only hold a minority economic interest in each of the Target Companies upon completion of the Investment and the cost of insurance, the Group does not intend to purchase any insurance to cover the risks relating to the Contractual Arrangements.

INFORMATION ON THE GROUP AND OTHER PARTIES TO THE ACQUISITION

The Group

The Company is a company incorporated in the Cayman Islands with limited liability, and the shares of which are listed on the main board of the Stock Exchange. As specialised in integrated development of residential and commercial properties, the Company is one of the leading real estate developers in the PRC. The Company adheres to the regional focus and high-end boutique development strategy, owning lots of developed or developing high-quality projects in the 1st tier and the core 2nd tier cities across the PRC, covering many property types ranging from high-rise residences, detached villas, retail properties and offices.

Sunac Real Estate

Sunac Real Estate is a company established in the PRC with limited liability and an indirect wholly-owned subsidiary of the Company, which is principally engaged in property development and investment business in the PRC.

Leshi Holding

Leshi Holding is a company established in the PRC with limited liability whose principal business activity is investment management.

Xinle Asset

Xinle Asset is a partnership established in the PRC with limited liability whose principal business activity is asset management.

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Tianjin Jiarui

Tianjin Jiarui is a company established in the PRC with limited liability whose principal business activity is business management consulting services. It is a wholly-owned subsidiary of Tianjin Yingrui which is in turn owned as to 50% by Mr. Wang and 50% by Mr. Zheng, both of whom are senior management of the Company. As a result of the Contractual Arrangements, the assets and liabilities and results of operation of Tianjin Jiarui have been consolidated into the Group’s consolidated financial statements. Save as aforesaid, to the best of the Directors’ knowledge, information and belief having made all reasonable enquires, Tianjin Jiarui is independent of the Company and connected persons (as defined in the Listing Rules) of the Company.

REASONS FOR AND BENEFITS OF THE INVESTMENT

The Company’s contracted sales in 2016 was more than RMB150 billion, ranking 7th among industry peers, and had established its presence in the national core cities to provide sufficient land reserves for future development. The Company will consider using a small amount of resources to strategically invest in companies with a competitive edge in other industries with a growth potential without affecting the sustainable and healthy development of its property business.

Based on the huge population base and the continuous upgrading of purchasing power in the PRC, the Company is optimistic about the investment opportunities as a result of the technological innovation and consumption upgrade sectors for a long time. Leshi has established the development space and great potential of the Leshi ecosystem with its unique and competitive large-screen hardware platform as carrier, and its video, film & television, sports and games as contents. The subject of the Investment is the mature and competitive business segment in the Leshi ecosystem.

The Company believes that the Investment will bring a better return on capital for the Company and the Company will have greater room for cooperation with Leshi in the field of industrial real estate, and will also bring continued benefits to the further growth of the Company’s property business.

The Board considers that the terms of the Investment were determined after arm’s length negotiations between the parties thereto and the Directors are of the view that the terms of the Investment are fair and reasonable and in the interests of the Company and the Shareholders as a whole.

LISTING RULES IMPLICATIONS

As one or more of the applicable percentage ratios in respect of the Investment exceed 25% and all of such ratios are less than 100%, the Investment constitutes a major transaction for the Company under Chapter 14 of the Listing Rules and is subject to the reporting, announcement and shareholders’ approval requirements pursuant to Chapter 14 of the Listing Rules.

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WRITTEN SHAREHOLDER’S APPROVAL

Pursuant to Rule 14.44 of the Listing Rules, in lieu of a resolution to be passed at a general meeting of the Company, written shareholder’s approval for the Investment has been obtained from the controlling shareholder of the Company, namely Sunac International, who held 2,042,623,884 Shares, representing approximately 52.92% of the issued share capital of the Company as at the date of such written approval. To the best of the Directors’ knowledge, information and belief, after having made all reasonable enquiries, none of the Shareholders had any material interest in the Investment and therefore no Shareholder would be required to abstain from voting if the Company were to convene an extraordinary general meeting for the approval of the Investment.

WAIVER FROM STRICT COMPLIANCE WITH THE REQUIREMENTS UNDER THE LISTING RULES

Waiver from strict compliance with Rule 14.67(6)(a)(i) and Rule 14.67(7) of the Listing Rules

Pursuant to Rule 14.67(6)(a)(i) and Rule 14.67(7) of the Listing Rules, the Company is required to include in this circular an accountant’s report on the Target Companies which is prepared in accordance with Chapter 4 of the Listing Rules and a discussion and analysis on results of the Target Companies covering all those matters set out in paragraph 32 of Appendix 16 to the Listing Rules for the period reported in such accountant’s report. The accounts on which the accountant’s report is based must relate to a financial period ended six months or less before this circular is issued, and the financial information on the Target Companies must be prepared using accounting policies which should be materially consistent with those of the Company. In this regard, the Company is required under Chapter 4 of the Listing Rules to include an accountant’s report on the Target Companies with the financial information of the Target Companies for the three financial years ended 31 December 2016 plus a stub period which is ended not more than six months from the date of this circular prepared under HKFRS and the Company is also required to include the management discussion and analysis on results of the Target Companies for the financial periods reported in such accountant’s report.

As the Company considers that the strict compliance with Rule 14.67(6)(a)(i) and Rule 14.67(7) of the Listing Rules would be unduly burdensome, the Company has applied for waiver from strict compliance of the aforesaid Listing Rules on the following grounds:

• (a) Upon completion of the Investment, the Target Companies have not become subsidiaries of the Company, and the results of the Target Companies are not consolidated into the financial statements of the Company. The investment in the Target Companies represents only investment of the Company for capital return and is accounted for as equity interest held for investment purpose by the Company.

• (b) Leshi Internet is a company listed on the Shenzhen Stock Exchange. Leshi Zhixin is a subsidiary of Leshi Internet and its results are consolidated in the audited consolidated financial statements of Leshi Internet and covered in the management discussion and analysis in respect of the consolidated financial results of Leshi Internet. The financial statements of Leshi Internet for each of the three financial years ended 31 December 2016 prepared in accordance with CAS were audited by reputable accounting firms in the PRC. The unaudited consolidated financial statements of Leshi Internet for the three months

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ended 31 March 2017 were prepared in accordance with CAS. The financial statements and regulatory announcements and reports of Leshi Internet are openly accessible to the general public on the website of the Shenzhen Stock Exchange, including all the Shareholders and potential investors of the Company.

• (c) Leshi Pictures is currently a private company and the Group is not able to obtain its financial information from the public domain. As disclosed in the recent announcements published by Leshi Internet, it has been proposed that Leshi Pictures will be acquired by Leshi Internet by way of a material asset restructuring by Leshi Internet which is subject to regulatory approval. It is currently uncertain as to when will such material asset restructuring be implemented. Based on the Company’s discussion with the Target Companies, the Company has been given to understand that the acquisition of Leshi Pictures by Leshi Internet will involve regulatory announcements by Leshi Internet, which will include the latest audited accounts of Leshi Pictures (depending on such announcement’s actual publication date, such audited accounts are expected to cover the financial years ended 31 December 2015 and 2016 and may include a subsequent period, if any) and the related discussion and analysis on operating results of Leshi Pictures for the reported periods.

• (d) None of the audited consolidated financial statements of Leshi Internet (having incorporated the assets and liabilities and financial results of its consolidated subsidiaries, including but not limited to Leshi Zhixin) for the three years ended 31 December 2016, nor the audited consolidated financial statements of Leshi Pictures for the year ended 31 December 2016, has been issued with any audit qualifications.

• (e) After consultation with the Target Companies and taking into account different factors, including that the Target Companies will not become subsidiaries of the Company, the Company considers that it is practical and appropriate to make the proposed alternative disclosures in this circular based on the available information of the Target Companies prepared under CAS. Even assuming the Target Companies are prepared to provide extensive access to their accounting records and provide explanations in relation to the same, the Company would have to incur substantial cost and expense to re-audit the financial data and information contained in such audited financial statements and re-state them in accordance with the HKFRS. Moreover, such re-audit and re-statement would produce no material increase in benefit to the Shareholders and potential investors of the Company.

• (f) The Company considers that it has taken reasonable steps to request for information for compliance with the requirements under Rule 14.67(6)(a)(i) and Rule 14.67(7) of the Listing Rules, and a relaxation of such requirements, which are unduly burdensome and impractical to the Company in the circumstances, would unlikely result in undue risks to the Shareholders and potential investors of the Company.

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Alternative disclosures

The Company has included the following information in this circular as alternative disclosure to an accountant’s report of the Target Companies under Chapter 4 of the Listing Rules and management discussion and analysis of Leshi Pictures as required under Rule 14.67(7) of the Listing Rules:

• (a) full text of the audited consolidated financial statements of Leshi Internet for the three financial years ended 31 December 2016 prepared under CAS and audited by the auditors Certified Public Accountants (special general partnership) (華普天健會計師事務所（特殊 普通合夥）) for the financial year ended 31 December 2014, and SHINEWING Certified Public Accountants (special general partnership) (信永中和會計師事務所（特殊普通合 夥）) for the financial years ended 31 December 2015 and 2016) and the unaudited consolidated financial statements of Leshi Internet for the three months ended 31 March 2017 prepared under CAS as extracted from the published documents of Leshi Internet, which are set out on pages 43 to 474 in Appendix II to this circular;

• (b) an analysis on the accounting policies adopted by Leshi Internet and its consolidated subsidiaries and those adopted by the Company as to whether material differences exist between them, which is reported on by SHINEWING (HK) CPA Limited in accordance with the Hong Kong Standard on Assurance Engagements 3000. Such analysis is set out on pages 475 to 485 in Appendix II to this circular;

• (c) the management discussion and analysis of the results of operations of Leshi Internet for the three financial years ended 31 December 2016 and the three months ended 31 March 2017 as extracted from the published documents of Leshi Internet, which are set out on pages 486 to 588 in Appendix III to this circular;

• (d) full text of the audited consolidated financial statements of Leshi Pictures for the financial year ended 31 December 2016 prepared under CAS and audited by the auditor of Leshi Pictures, Beijing Puhongde CPA Co., Ltd. (general partnership)* (北京普宏德會計師事務

• （普通合夥）), which are set out on pages 589 to 616 in Appendix IV to this circular;

• (e) the full text of the unaudited consolidated financial statements of Leshi Pictures for the three months ended 31 March 2017 prepared under CAS, reviewed by the auditor of Leshi Pictures, Beijing Puhongde CPA Co., Ltd. (general partnership)* (北京普宏德會計師事務

• （普通合夥）), and the full text of their review report, which are set out on pages 617 to 647 in Appendix IV to this circular;

• (f) an analysis on the accounting policies adopted by Leshi Pictures and its consolidated subsidiaries and those adopted by the Company as to whether material differences exist between them, which is reported on by SHINEWING (HK) CPA Limited in accordance with Hong Kong Standard of Assurance Engagement 3000. Such analysis is set out on pages 648 to 655 in Appendix IV to this circular; and

• (g) the reasons for and details of the waiver sought in respect of the requirements under Rule 14.67(6)(a)(i) and Rule 14.67(7) of the Listing Rules.

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The Company considers that the alternative disclosures described above would provide relevant, meaningful and reliable information on the financial position of the Target Companies for the financial years ended 31 December 2014, 2015 and 2016 (where applicable) and the three months ended 31 March 2017, and the preparation of the accountant’s report and management discussion and analysis of the Target Companies for inclusion in this circular in strict compliance with the requirements of Rules 14.67(6)(a)(i) and Rule 14.67(7) of the Listing Rules would be unduly burdensome and would result in unnecessary time and effort being incurred that may not add much value to the Shareholders in understanding the financial position of the Target Companies.

In addition, the Company expects to further publish an announcement on the respective websites of the Stock Exchange (www.hkexnews.hk) and the Company (www.sunac.com.cn) containing the full text of the regulatory announcement of Leshi Internet, to be published by Leshi Internet in respect of the proposed restructuring of Leshi Pictures, which is expected to contain the latest audited accounts of Leshi Pictures (depending on such announcement’s actual publication date, such audited accounts are expected to cover the financial years ended 31 December 2015 and 2016 and may include a subsequent period, if any) and the related discussion and analysis on operating results of Leshi Pictures for the reported periods, together with their English translation, as soon as practicable after its publication taking into account necessary translation time for the purpose of providing information to the Shareholders.

Based on the information provided by the Company and the alternative disclosures described above, the Stock Exchange has granted the Company waiver from strict compliance with the requirements under Rules 14.67(6)(a)(i) and Rule 14.67(7) of the Listing Rules.

RECOMMENDATION

The Directors (including the independent non-executive Directors) consider that the terms of the Investment are fair and reasonable and the Investment is in the interest of the Company and the Shareholders as a whole. Although a general meeting will not be convened by the Company to approve the Investment, if such a general meeting were to be convened by the Company, the Board would recommend the Shareholders to vote in favour of the resolution to approve the Investment.

OTHER TRANSACTIONS IN RELATION TO THE LESHI COMPANIES

The following sets forth the details of some other transactions undertaken by the Group in relation to the Leshi Companies for information of the Shareholders.

Acquisition of Chongqing Longxing Project (重慶龍興項目)

On 1 March 2017, Chongqing Sunac, an indirect wholly-owned subsidiary of the Company, entered into a co-operative agreement with Leshi Investment, pursuant to which, Chongqing Sunac as buyer agreed to acquire and Leshi Investment as seller agreed to dispose 50% equity and debt interests in Chongqing Leshijie at a total consideration of RMB220,399,351.89, of which (a) the consideration for the equity interest was RMB5,000,000; and (b) the outstanding shareholder’s loans owed by Chongqing Leshijie to Leshi Investment and Leshi Holding was RMB215,399,351.89. The consideration was arrived at after arm’s length negotiations with reference to the market value of

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assets attributable to 50% equity interest in Chongqing Leshijie and the amount of outstanding shareholder’s loans owed by Chongqing Leshijie to Leshi Investment and Leshi Holding. The consideration was paid by Chongqing Sunac with the Group’s internal resources. The Directors are of the view that the terms of the Chongqing Leshijie Acquisition are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

Chongqing Leshijie is mainly engaged in the development of the Chongqing Longxing Project located in Liangjiang New Area, Chongqing, the PRC which will be mainly developed for residential and commercial uses. The project has a site area of 254,411 sq.m., a total GFA of 399,284 sq.m. and a saleable area of 356,130 sq.m.. As at the Latest Practicable Date, sale had not commenced in respect of this project.

Following completion of the Chongqing Leshijie Acquisition and as at the Latest Practicable Date, the Company indirectly held 50% equity interest in Chongqing Leshijie, and Chongqing Leshijie had become a joint venture of the Company. The remaining 50% equity interest in Chongqing Leshijie was held by Leshi Investment.

Acquisition of Shanghai Longshi Plaza Project (上海隆視廣場項目)

On 13 March 2017, Shanghai Sunac, an indirect wholly-owned subsidiary of the Company, entered into an equity transfer agreement with Leshi Holding, pursuant to which, Shanghai Sunac as buyer agreed to acquire and Leshi Holding as seller agreed to dispose 50% equity and debt interests in Shanghai Longshi at a total consideration of RMB300,000,000, of which (a) the consideration for the equity interest was RMB258,452,500; and (b) the outstanding shareholder’s loans owed by Shanghai Longshi to Leshi Holding was RMB41,547,500. The consideration was arrived at after arm’s length negotiations with reference to the market value of the asset attributable to 50% equity interest in Shanghai Leshijie and the amount of outstanding shareholder’s loans owed by Shanghai Longshi to Leshi Holding. The consideration was paid by Shanghai Sunac with the Group’s internal resources. The Directors are of the view that the terms of the Shanghai Longshi Acquisition are fair and reasonable and in the interest of the Company and the Shareholders as a whole.

Shanghai Longshi is mainly engaged in development of the Shanghai Longshi Plaza Project which is located in Hongqiao CBD, Shanghai, the PRC and which will be mainly developed for office uses. The project has a site area of 15,820 sq.m. and a total GFA of 61,039 sq.m.

Following completion of the Shanghai Longshi Acquisition and as the Latest Practicable Date, the Company indirectly held 50% equity interest in Shanghai Longshi, and Shanghai Longshi had become a joint venture of the Company. The remaining 50% equity interest in Shanghai Longshi was held by an independent third party.

Trust Investment Scheme

On 26 June 2017, Sunac Real Estate, an indirect wholly-owned subsidiary of the Company, has subscribed for the 60% subordinated trust units of a trust scheme (the “ Trust Scheme ”) at a total consideration of RMB331,000,000, which was funded with the internal resources of the Group. The trustee of the Trust Scheme is a trust company established in the PRC with limited liability which is

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LETTER FROM THE BOARD

engaged in trust business in the PRC. The proceeds from the subscription under the Trust Scheme are entrusted to the trustee for making investment at its sole discretion on behalf of the holders of the trust units. As at the Latest Practicable Date, the Trust Scheme indirectly held 6% equity interest in Leshi Pictures.

Listing Rules implications for these transactions

As all of the applicable percentage ratios in respect of each of the Chongqing Leshijie Acquisition, the Shanghai Longshi Acquisition and the investment in the Trust Scheme are less than 5%, each of these transactions is exempted from the reporting, announcement and shareholders’ approval requirements under Chapter 14 of the Listing Rules.

ADDITIONAL INFORMATION

Your attention is also drawn to the additional information set out in the appendices to this Circular.

By Order of the Board Sunac China Holdings Limited SUN Hongbin Chairman

— 39 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

1. FINANCIAL INFORMATION OF THE GROUP

The audited consolidated financial statements of the Group for the three years ended 31 December 2014, 2015 and 2016 together with the relevant notes thereto are disclosed in the following documents which have been published on the website of the Stock Exchange (www.hkexnews.hk) and the website of the Company (www.sunac.com.cn):

• pages 58 to 140 in the annual report of the Company for the year ended 31 December 2014 published on 16 April 2015;

• pages 71 to 154 in the annual report of the Company for the year ended 31 December 2015 published on 18 April 2016; and

• pages 98 to 196 in the annual report of the Company for the year ended 31 December 2016 published on 18 April 2017.

Each of the said consolidated financial statements of the Group is incorporated by reference to this circular and forms part of this circular. The management discussion and analysis of the Company for the years ended 31 December 2014, 2015 and 2016 are disclosed in the published annual reports of the Company for the relevant period. Please also see below the links to the relevant annual reports of the Company:

• Annual report of the Company for the year ended 31 December 2014

http://www.hkexnews.hk/listedco/listconews/SEHK/2015/0416/LTN20150416362.pdf

• Annual report of the Company for the year ended 31 December 2015

http://www.hkexnews.hk/listedco/listconews/SEHK/2016/0418/LTN20160418433.pdf

• Annual report of the Company for the year ended 31 December 2016

http://www.hkexnews.hk/listedco/listconews/SEHK/2017/0418/LTN2017418616.pdf

2. INDEBTEDNESS STATEMENT

(i) Borrowings and debts

As at the close of business on 31 July 2017, being the latest practicable date for the purpose of this statement of indebtedness prior to the printing of this circular, the Group had outstanding borrowings of approximately RMB179,963.0 million, of which RMB147,754.0 million were secured or jointly secured by properties under development, completed properties held for sale and certain equity interests of the Company’s subsidiaries (including those legally transferred as collateral).

— 40 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The Group’s contingent liabilities at the close of business on 31 July 2017 are as follows:

	RMB million
Guarantees in respect of mortgage facilities for certain purchasers
of the Group’s properties	24,849.9
Guarantees in respect of borrowings owed by joint ventures and
associates of the Group	16,609.7

(ii) General

Save as disclosed above and apart from intra-group liabilities and normal trade payables in the normal course of business, as at the close of business on 31 July 2017, the Group did not have any debt securities issued and outstanding, and authorised or otherwise created but unissued, bank overdrafts, charges or debentures, mortgages, loans or other similar indebtedness or any finance lease commitments, hire purchase commitments, liabilities under acceptances (other than normal trade bills), acceptance credits or any guarantees.

The Directors have confirmed that there have been no material changes in the indebtedness and contingent liabilities of the Group since 31 July 2017.

3. MATERIAL ADVERSE CHANGE

The Company is not aware of any material adverse change in the financial or trading position of the Group since 31 December 2016, being the date to which the latest published audited financial statements of the Company were made up.

4. WORKING CAPITAL

The Directors are of the opinion that, after taking into account the financial resources available to the Group including the available credit facilities and the Group’s internally generated funds and the cash flow impact of the Investment, the Group has sufficient working capital to satisfy its requirements for at least the next 12 months following the date of this circular.

5. FINANCIAL AND TRADING PROSPECTS OF THE GROUP

The Group will continue to insist on the strategy of regional in-depth development to further consolidate and develop its market position and influence in the existing regions and cities. On the other hand, the Group will continue to focus on the development and management of high-end properties and focus on building high-end premium properties for customers in a persistent way.

— 41 —

FINANCIAL INFORMATION OF THE GROUP

APPENDIX I

The unaudited consolidated pro forma financial information of the Enlarged Group illustrating the financial impact of the Investment on the assets and liabilities of the Enlarged Group is set out in Appendix V to this circular. The pro forma financial information of the Enlarged Group has been prepared for illustrative purpose only, based on the judgments and assumptions of the Directors, and, due to its hypothetical nature, it may not give a true picture of the financial position of the Enlarged Group as at the date of completion of the Investment or any future date.

— 42 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

EXTRACT OF CONSOLIDATED FINANCIAL STATEMENTS OF LESHI INTERNET

The following is an extract of the audited consolidated financial statements of Leshi Internet for the years ended 31 December 2014, 2015 and 2016 and the unaudited consolidated financial statements of Leshi Internet for the first quarter ended 31 March 2017, which were prepared in accordance with CAS, as extracted from the respective annual reports/quarterly report and financial statements of Leshi Internet for the years ended 31 December 2014, 2015 and 2016 and the first quarter ended 31 March 2017. These financial statements were issued in Chinese and the English translated version is provided for information purposes only. In case of discrepancies between the two versions, the Chinese version shall prevail.

The annual reports/quarterly report and consolidated financial statements of Leshi Internet for the years ended 31 December 2014, 2015 and 2016 and the first quarter ended 31 March 2017 are available at the website of the Shenzhen Stock Exchange (http://disclosure.szse.cn/m/search0425.jsp).

The Directors wish to emphasize that the extracts reproduced below are not prepared for incorporation into this circular and the Group has not participated in their preparation. As such, the Directors do not express any view as to their truth, accuracy or completeness, and the Shareholders and investors should exercise caution and should not place undue reliance on such information.

A. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF LESHI INTERNET FOR THE YEAR ENDED 31 DECEMBER 2014

Section IX Financial Reports

I. Audit Report

Type of audit opinion Standard clean audit opinion Date of signing of audit report March 27th, 2015 Name of audit institution Huapu Tianjian Certified Public Accountants (special general partnership) Reference number of audit report HSZ 2015 (1618) Name of certified public Li Xiaogang, Gao Yi, Zhou Hongbo accountant

Text of Audit Report

All shareholders of Leshi Internet Information & Technology Corp (Beijing):

We have audited the attached financial statement of Leshi Internet Information & Technology Corp (Beijing) (hereinafter referred to as Letv), including the financial statement for merging and the parental company on December 31st, 2014, the profit statement for merging and the parental company, cash flow statement of merging and the parental company, statement of change in stockholder’s equity and foot-notes to the financial statement in the year of 2014.

— 43 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

(I) Management’s responsibility for the financial statements

Letv management is responsible for the preparation and the true and fair presentation of these financial statements. This responsibility includes (1) preparing the financial statements in accordance with A ccounting Standards for Business Enterprises , to realize a fair reflection; and (2) designing, implementing and maintaining necessary internal control to ensure relevant financial statements are free from material misstatement whether due to fraud or error.

(II) Responsibility of certified public accountant

Our responsibility is to express an opinion on these financial statements based on our audit. We have performed the audit in accordance with the Chinese CPA Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement.

Auditing involves the implementation of audit procedure to obtain the related financial statement amount and disclose audit evidence. The selection of audit procedure depends on judgment of the certified public accountant (CPA), including the risk assessment of material misstatement of financial statements due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our qualified opinion.

(III) Audit Opinion

In our opinion, the financial statements of Letv were prepared in accordance with the Accounting Standards for Business Enterprises, giving a true and fair view of the financial position of merging and parent company as of December 31st, 2014, and of its financial performance and cash flows for the year then ended.

— 44 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

II. Financial Statements

The unit in the notes to financial statements is RMB yuan.

1. Consolidated balance sheet

Prepared by: Leshi Internet Information & Technology Corp (Beijing)

March 27th, 2015

Items Current assets: Monetary funds Deposit reservation for balance Lending funds Financial liabilities which are measured by fair value and the variation of which is recorded into the profits and losses of the current period Derivative financial assets Notes receivable Accounts receivable Advance payment Premiums receivable Reinsurance accounts receivable Provision of cession receivable Interest receivable Dividend receivable Other receivables Redemptory monetary capital for sale Inventory Classified as liabilities held for sale Non-current assets maturing within one year Other current assets Total current assets	Unit: RMB Closing Balance Opening Balance 499,850,156.29 608,218,105.29 11,337,263.64 54,363,352.84 1,892,606,343.05 950,248,021.06 298,718,272.52 46,613,337.42 75,839,386.69 33,148,535.63 733,526,978.69 146,626,151.46 73,000,000.00 23,000,000.00 3,584,878,400.88 1,862,217,503.70	Unit: RMB Closing Balance Opening Balance 499,850,156.29 608,218,105.29 11,337,263.64 54,363,352.84 1,892,606,343.05 950,248,021.06 298,718,272.52 46,613,337.42 75,839,386.69 33,148,535.63 733,526,978.69 146,626,151.46 73,000,000.00 23,000,000.00 3,584,878,400.88 1,862,217,503.70
		1,862,217,503.70

— 45 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items

Closing Balance Opening Balance

Non-current assets:

Non-current assets:
Loans and payments on behalf Financial assets available for sale Held-to-maturity investments Long-term accounts receivables Long-term equity investments Investment real estate Fixed assets Construction in process Project materials Disposal of fixed assets Productive biological assets Oil and gas assets Intangible assets Development expenses Goodwill Long-term unamortized expenses Deferred income tax assets Other non-current assets Sub-total of non- current assets Total assets	20,000,000.00 343,015,085.10 3,338,541,906.06 388,056,048.72 747,585,265.47 1,930,683.00 196,218,582.19 230,797,275.71 5,266,144,846.25 8,851,023,247.13	20,000,000.00 318,733.87 179,456,277.57 2,641,514,257.40 65,931,646.89 26,756,965.48 224,129,581.31
		3,158,107,462.52
		5,020,324,966.22

— 46 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Current liabilities: Short-term loans Borrowings from the Central Bank Accept money deposits and call loans from banks Borrowing funds Financial liabilities which are measured by fair value and the variation of which is recorded into the profits and losses of the current period Derivative financial assets Notes payable Accounts payable Advance payments Financial assets sold for repurchase Handling charges and commissions payable Payroll payable Taxes payable Interest payable Dividends payable Other payables Reinsurance accounts receivable Provision for insurance contracts Receivings from vicariously traded securities Receivings from vicariously sold securities Liabilities classified as held for sale Non-current liabilities maturing within one year Other current liabilities Total current liabilities	Closing Balance Opening Balance 1,388,000,000.00 970,000,000.00 20,000,000.00 22,500,000.00 1,605,289,561.49 782,182,977.60 323,395,607.04 44,327,746.55 3,009,132.52 2,948,210.24 409,757,631.22 155,624,444.69 15,200,173.46 25,835,645.21 11,118,812.41 27,349,670.91 12,707,190.76 401,148,171.00 291,021,929.44 199,606,666.61 199,453,333.34 4,403,875,426.66 2,506,601,477.83	Closing Balance Opening Balance 1,388,000,000.00 970,000,000.00 20,000,000.00 22,500,000.00 1,605,289,561.49 782,182,977.60 323,395,607.04 44,327,746.55 3,009,132.52 2,948,210.24 409,757,631.22 155,624,444.69 15,200,173.46 25,835,645.21 11,118,812.41 27,349,670.91 12,707,190.76 401,148,171.00 291,021,929.44 199,606,666.61 199,453,333.34 4,403,875,426.66 2,506,601,477.83
		2,506,601,477.83

— 47 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Non-current liabilities: Long-term loans Bonds payable Including: preferred shares Perpetual bonds Long-term payables Long-term payroll payable Special accounts payable Accrued liabilities Deferred incomes Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Owner’s equity: Capital stock Other equity instruments Including: preferred shares Perpetual bonds Capital reserves Less: treasury stock Other comprehensive incomes Special reserves Surplus reserves General risk preparation Undistributed profits Total equity attributable to equity holders of the Company Minority equity Total owner’s equity Total liabilities and owner’s equity	Closing Balance Opening Balance 16,700,000.00 398,610,488.94 81,873,823.68 18,887,248.92 6,231,939.27 1,015,568,661.50 1,103,674,424.45 434,197,737.86 5,507,549,851.11 2,940,799,215.69 841,190,063.00 798,466,298.00 1,366,018,527.78 179,633,637.80 -706,643.49 -1,205,362.95 116,965,360.22 63,605,357.83 843,360,350.78 559,040,213.83 3,166,827,658.29 1,599,540,144.51 176,645,737.73 479,985,606.02 3,343,473,396.02 2,079,525,750.53 8,851,023,247.13 5,020,324,966.22	Closing Balance Opening Balance 16,700,000.00 398,610,488.94 81,873,823.68 18,887,248.92 6,231,939.27 1,015,568,661.50 1,103,674,424.45 434,197,737.86 5,507,549,851.11 2,940,799,215.69 841,190,063.00 798,466,298.00 1,366,018,527.78 179,633,637.80 -706,643.49 -1,205,362.95 116,965,360.22 63,605,357.83 843,360,350.78 559,040,213.83 3,166,827,658.29 1,599,540,144.51 176,645,737.73 479,985,606.02 3,343,473,396.02 2,079,525,750.53 8,851,023,247.13 5,020,324,966.22
		434,197,737.86
		2,940,799,215.69
		798,466,298.00 179,633,637.80 -1,205,362.95 63,605,357.83 559,040,213.83
		1,599,540,144.51 479,985,606.02
		2,079,525,750.53
		5,020,324,966.22

Legal representative: Principal in charge of accounting: Principal of accounting body: Jia Yueting Yang Lijie Li Yongchao

— 48 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

2. Balance sheet of the parent company

Items Current assets: Monetary funds Financial assets which are measured by fair value and the variation of which is recorded into the profits and losses of the current period Derivative financial assets Notes receivable Accounts receivable Advance payment Interest receivable Dividends receivable Other receivables Inventory Classified as liabilities held for sale Non-current assets maturing within one year Other current assets Total current assets	Unit: RMB Closing Balance Opening Balance 327,420,790.13 209,547,138.33 1,900,000.00 10,067,401.81 1,549,475,005.40 884,713,999.80 91,823,763.77 20,486,897.45 1,616,940,809.06 886,416,812.76 74,413,203.57 57,445,424.14 23,000,000.00 23,000,000.00 3,684,973,571.93 2,091,677,674.29	Unit: RMB Closing Balance Opening Balance 327,420,790.13 209,547,138.33 1,900,000.00 10,067,401.81 1,549,475,005.40 884,713,999.80 91,823,763.77 20,486,897.45 1,616,940,809.06 886,416,812.76 74,413,203.57 57,445,424.14 23,000,000.00 23,000,000.00 3,684,973,571.93 2,091,677,674.29
		2,091,677,674.29

— 49 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Non-current assets: Financial assets available for sale Held-to-maturity investments Long-term accounts receivables Long-term equity investments Investment real estate Fixed assets Construction in process Project materials Disposal of fixed assets Productive biological assets Oil and gas assets Intangible assets Development expenses Goodwill Long-term unamortized expenses Deferred income tax assets Other non-current assets Sub-total of Non- current assets Total assets Current liabilities: Short-term loans Financial liabilities which are measured by fair value and the variation of which is recorded into the profits and losses of the current period Derivative financial assets Notes payable Accounts payable Receipts in advance Payroll payable Taxes payable Interest payable Dividends payable Other payables Liabilities classified as held for sale Non-current liabilities maturing within one year Other current liabilities Total current liabilities	Closing Balance Opening Balance 20,000,000.00 20,000,000.00 2,424,070,405.43 684,448,920.11 322,263,096.32 172,256,610.85 1,059,915,451.57 907,432,114.59 181,733,554.42 43,876,252.03 10,589,900.42 5,424,813.91 92,956,947.41 97,746,251.65 4,111,529,355.57 1,931,184,963.14 7,796,502,927.50 4,022,862,637.43 1,168,000,000.00 940,000,000.00 220,000,000.00 580,280,544.94 231,948,481.53 14,846,291.17 10,275,764.41 1,106,374.85 2,182,583.84 270,378,240.83 106,546,382.76 15,200,173.46 25,835,645.21 11,118,812.41 448,692,998.42 281,854,042.02 401,148,171.00 291,021,929.44 199,606,666.61 199,453,333.34 3,330,378,273.69 2,089,118,162.55	Closing Balance Opening Balance 20,000,000.00 20,000,000.00 2,424,070,405.43 684,448,920.11 322,263,096.32 172,256,610.85 1,059,915,451.57 907,432,114.59 181,733,554.42 43,876,252.03 10,589,900.42 5,424,813.91 92,956,947.41 97,746,251.65 4,111,529,355.57 1,931,184,963.14 7,796,502,927.50 4,022,862,637.43 1,168,000,000.00 940,000,000.00 220,000,000.00 580,280,544.94 231,948,481.53 14,846,291.17 10,275,764.41 1,106,374.85 2,182,583.84 270,378,240.83 106,546,382.76 15,200,173.46 25,835,645.21 11,118,812.41 448,692,998.42 281,854,042.02 401,148,171.00 291,021,929.44 199,606,666.61 199,453,333.34 3,330,378,273.69 2,089,118,162.55
		1,931,184,963.14
		4,022,862,637.43
		940,000,000.00 231,948,481.53 10,275,764.41 2,182,583.84 106,546,382.76 25,835,645.21 281,854,042.02 291,021,929.44 199,453,333.34
		2,089,118,162.55

— 50 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Non-current liabilities: Long-term loans Bonds payable Including: preferred shares Perpetual bonds Long-term payables Long-term payroll payable Special accounts payable Accrued liability Deferred revenue Deferred income tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Owner’s equity: Capital stock Other equity instruments Including: preferred shares Perpetual bonds Capital reserves Less: treasury stock Other comprehensive incomes Special reserves Surplus reserves Undistributed profits Total owner’s equity Total liabilities and owner’s equity	Closing Balance Opening Balance 16,700,000.00 398,610,488.94 81,873,823.68 18,887,248.92 6,231,939.27 1,015,568,661.50 1,103,674,424.45 434,197,737.86 4,434,052,698.14 2,523,315,900.41 841,190,063.00 798,466,298.00 1,449,915,934.00 136,986,860.77 116,965,360.22 63,605,357.83 954,378,872.14 500,488,220.42 3,362,450,229.36 1,499,546,737.02 7,796,502,927.50 4,022,862,637.43	Closing Balance Opening Balance 16,700,000.00 398,610,488.94 81,873,823.68 18,887,248.92 6,231,939.27 1,015,568,661.50 1,103,674,424.45 434,197,737.86 4,434,052,698.14 2,523,315,900.41 841,190,063.00 798,466,298.00 1,449,915,934.00 136,986,860.77 116,965,360.22 63,605,357.83 954,378,872.14 500,488,220.42 3,362,450,229.36 1,499,546,737.02 7,796,502,927.50 4,022,862,637.43
		434,197,737.86
		2,523,315,900.41
		798,466,298.00 136,986,860.77 63,605,357.83 500,488,220.42
		1,499,546,737.02
		4,022,862,637.43

— 51 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

3. Consolidated profit statement

			Unit: RMB
		Amount in	Amount in Prior
Items		Current Period	Period
I.	Gross revenues	6,818,938,622.38	2,361,244,730.86
	Including: business incomes	6,818,938,622.38	2,361,244,730.86
	Interest incomes
	Earned premium
	Fee and commission incomes
II.	Gross costs	6,771,077,207.46	2,123,181,947.21
	Including: operating costs	5,828,133,468.42	1,668,684,007.47
	Interest payments
	Fee and commission incomes
	Surrender value
	Net payments for insurance claims
	Net provision for insurance contracts
	Expenditures dividend policy
	Amortized reinsurance expenditures
	Business taxes and surcharges	56,848,870.42	25,921,973.19
	Selling expenses	489,035,465.49	194,520,082.60
	Management fees	175,454,652.60	89,988,324.29
	Financial expenses	167,915,495.78	116,298,019.88
	Asset impairment losses	53,689,254.75	27,769,539.78
	Add: incomes from changes in fair value (loss is
	indicated by “-”)
	Investment incomes (loss is indicated by “-”)	5,038.44	-1,355,138.81
	Including: investment incomes from joint
	ventures and associates	-318,733.87	-90,791.38
	Exchange earnings (loss is indicated by “-”)
III.	Operating profits (deficit is indicated by “-”)	47,866,453.36	236,707,644.84
	Add: Non-operating incomes	27,556,349.09	10,694,405.72
	Including: disposal gains from non-current assets
	Less: non-operating expenses	2,523,697.61	1,001,167.33
	Including: disposal losses from non-current
	assets	474,357.08	1,167.33
IV.	Total profits (the total loss expressed with “-”)	72,899,104.84	246,400,883.23
	Less: income tax expenses	-55,897,456.04	14,020,132.73
V.	Net profits (the net loss expressed with “-”)	128,796,560.88	232,380,750.50
	Net profit attributed to owners of parent company	364,029,509.12	255,009,694.82
	Minority interest incomes	-235,232,948.24	-22,628,944.32

— 52 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

				Amount in	Amount in Prior
Items				Current Period	Period
VI.	Net of tax from other comprehensive incomes			498,719.46	-1,102,364.57
	Net amount of other comprehensive income after
	tax	attributed to owners of parent company		498,719.46	-1,102,364.57
	(I)	Other comprehensive incomes not allowed to
		be re-classified into profit and loss
		1.	Changes in net debt or assets caused by
			remeasurement and re-definition of
			benefit plan
		2.	Share of other comprehensive income not
			allowed to be re-classified into profit and
			loss of the invested company as per
			equity laws
	(II)	Other comprehensive incomes to be
		re-classified into profit and loss		498,719.46	-1,102,364.57
		1.	Share of other comprehensive income to
			be re-classified into profit and loss of the
			invested company as per equity laws
		2.	Profits and losses arising from the
			change in the fair value of a sellable
			financial asset
		3.	Profits and losses of sellable financial
			asset re-classified from the investments
			which will be held to their maturity
		4.	Losses and profits of cash flow hedging
			in force
		5.	Balance arising from the translation of
			foreign currency financial statements	498,719.46	-1,102,364.57
		6.	Others
	Net amount of other comprehensive income after
	tax	attributed to minority
VII.	Total comprehensive incomes			129,295,280.34	231,278,385.93
	Total	comprehensive income attributable to owners
	of parent company			364,528,228.58	253,907,330.25
	Total	comprehensive income attributable to
	minority			-235,232,948.24	-22,628,944.32

— 53 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

		Amount in	Amount in Prior
Items		Current Period	Period
VIII. Earnings per share:
(I)	Basic EPS	0.44	0.32
(II)	Diluted EPS	0.43	0.31

If enterprises under common control are merged in current period, the net profit of merged party before merging is RMB 0.00, and the net profit of the merged party of last period is RMB 0.00.

Legal representative: Principal in charge of accounting: Principal of accounting body: Jia Yueting Yang Lijie Li Yongchao

— 54 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Profit statement of the parent company

			Unit: RMB
		Amount in	Amount in Prior
Items		Current Period	Period
I.	Business incomes	2,359,676,820.96	1,466,809,712.09
	Less: operating costs	1,254,089,053.34	786,595,665.43
	Business taxes and surcharges	50,406,627.06	25,626,420.34
	Selling expenses	164,710,108.65	124,115,773.93
	Management fees	123,558,298.41	74,922,117.84
	Financial expenses	144,816,381.94	112,272,615.46
	Asset impairment losses	35,318,475.77	23,048,486.97
	Add: incomes from changes in fair value (loss is
	indicated by “-”)
	Investment incomes (loss is indicated by “-”)	-669,853.87	-1,681,266.13
	Including: investment incomes from joint
	ventures and associates	-318,733.87	-90,791.38
II.	Operating profits (loss expressed with “-”)	586,108,021.92	318,547,365.99
	Add: Non-operating incomes	13,653,440.00	6,176,150.00
	Including: disposal gains from non-current assets
	Less: non-operating expenses	38,921.26	1,001,167.33
	Including: disposal losses from non-current
	assets		1,167.33
III.	Total profit (total loss expressed with “-”)	599,722,540.66	323,722,348.66
	Less: income tax expenses	66,122,516.77	35,079,927.64
IV.	Net profits (the net loss expressed with “-”)	533,600,023.89	288,642,421.02

— 55 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

				Amount in	Amount in Prior
Item	s			Current Period	Period
V.	Net	of tax of other comprehensive income
	(I)	Other comprehensive incomes not allowed to be
		re-classified into profit and loss
		1.	Changes in net debt or assets caused by
			remeasurement and re-definition of benefit
			plan
		2.	Share of other comprehensive income not
			allowed to be re-classified into profit and
			loss of the invested company as per equity
			laws
	(II)	Other comprehensive incomes to be re-classified
		into profit and loss
		1.	Share of other comprehensive income to be
			re-classified into profit and loss of the
			invested company as per equity laws
		2.	Profits and losses arising from the change
			in the fair value of a sellable financial
			asset
		3.	Profits and losses of sellable financial asset
			re-classified from the investments which
			will be held to their maturity
		4.	Losses and profits of cash flow hedging in
			force
		5.	Balance arising from the translation of
			foreign currency financial statements
		6.	Others
VIII.	Total comprehensive income			533,600,023.89	288,642,421.02
VII.	Earnings		per share:
	(I)	Basic EPS		0.65	0.36
	(II)	Diluted EPS		0.63	0.35

Items

• V. Net of tax of other comprehensive income

— 56 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Consolidated cash flow statement

Unit: RMB Amount in Amount Incurred Items Current Period in Last Period I. Cash flows from operating activities: Cash received from sales of goods and rendering of services 5,829,074,513.65 1,458,402,367.07 Net increase of customer’s deposit and deposit taking of interbank Net increase in borrowings from central bank Net increase in loans from other financial institutions Cash premiums received on original insurance contracts Net cash received from reinsurance business Net increase in policy holder deposits and investment funds Net increase in disposed financial assets measured at fair value with changes recorded in current profits and losses Cash received from interests, fees and commissions Net increase in funds borrowed Net increase in repurchase business capital Tax refunds received 186,020.67 4,507,690.35 Cash received relating to other operating activities 139,137,661.24 146,426,905.84 Subtotal for cash inflow generated from operating activities 5,968,398,195.56 1,609,336,963.26 Cash paid for goods or receiving services 4,813,753,614.62 841,089,485.95 Net increase in customer loans and advances Net increase in deposits with central bank and with banks and other financial institutions Cash paid for indemnity of original insurance contract Cash paid for interests, fees and commissions Cash paid for policy dividends Cash paid to and on behalf of employees 354,345,989.41 213,450,656.35 Tax payments 144,100,574.77 61,874,503.84 Cash paid relating to other operating activities 422,015,282.80 317,070,920.53 Subtotal cash outflows from operating activities 5,734,215,461.60 1,433,485,566.67 Net cash flows from operating activities 234,182,733.96 175,851,396.59

Items

— 57 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

			Amount in	Amount Incurred
Items			Current Period	in Last Period
II.	Cash flows from investment activities:
		Cash received from disposal of investments	76,548,880.00	7,000,000.00
		Cash received from investment income	355,399.71	3,010,000.00
		Net amount of cash resulted from disposal of fixed
		assets, intangible assets and other long term
		assets	2,687.17	7,500.00
		Net cash received from the disposal of subsidiaries
		and other business entities
		Cash received relating to other investing activities
	Subtotal for cash inflow from investment activities		76,906,966.88	10,017,500.00
		Cash paid to acquire fixed assets, intangible assets
		and other long-term assets	1,273,869,838.35	906,831,359.38
		Cash paid for investments	89,506,119.00
		Net increase in pledge loans
		Net cash paid for the acquisition of subsidiaries
		and other business entities	239,204,736.97
		Cash paid relating to other investing activities	3,912.09	853,176.75
	Subtotal cash outflows from investment activities		1,602,584,606.41	907,684,536.13
	Net cash flows from investment activities		-1,525,677,639.53	-897,667,036.13
III.	Cash flows from financing activities:
		Cash received by investors	420,397,521.88	551,478,022.94
		Including: cash received from minority
		shareholder investment by subsidiary
		Cash received from borrowings	2,660,600,000.00	1,550,000,000.00
		Cash received from bonds issue
		Other cash received related to financing
		activities
	Subtotal cash inflows from financing activities		3,080,997,521.88	2,101,478,022.94
		Cash paid for repayments of debts	1,738,406,600.96	846,450,287.20
		Cash paid for distribution of dividends or profits,
		or cash payments for interests	161,794,712.42	114,793,470.72
		Including: dividend and profit paid by subsidiary
		to minority
		Other cash paid related to financing activities	27,529,193.63	25,574,278.99
	Subtotal cash outflows from financing activities		1,927,730,507.01	986,818,036.91
	Net cash flows from financing activities		1,153,267,014.87	1,114,659,986.03
IV.	Effect of exchange rate movement on cash and
	cash equivalent		-141,618.96	-646,637.66
V.	Net increments of cash and cash equivalent		-138,369,509.66	392,197,708.83
		Add: opening balance of cash and cash equivalents	585,718,105.29	193,520,396.46
VI.	Balance of cash and cash equivalent at the end of
	period		447,348,595.63	585,718,105.29

— 58 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

6. Cash flow statement of the parent company

			Unit: RMB
		Amount in	Amount in Prior
Items		Current Period	Period
I.	Cash flows from operating activities:
	Cash received from sales of goods and rendering of
	services	1,485,574,203.04	756,042,451.39
	Tax refunds received
	Cash received relating to other operating activities	1,242,535,799.63	717,885,212.59
	Subtotal for cash inflow generated from operating
	activities	2,728,110,002.67	1,473,927,663.98
	Cash paid for goods or receiving services	550,825,956.11	298,526,062.42
	Cash paid to and on behalf of employees	254,698,072.03	174,124,010.36
	Tax payments	116,933,647.56	54,049,753.26
	Cash paid relating to other operating activities	1,471,569,087.21	948,976,906.20
	Subtotal cash outflows from operating activities	2,394,026,762.91	1,475,676,732.24
	Net cash flows from operating activities	334,083,239.76	-1,749,068.26
II.	Cash flows from investment activities:
	Cash received from disposal of investments	4,048,880.00	7,000,000.00
	Cash received from investment income		3,010,000.00
	Net amount of cash resulted from disposal of fixed
	assets, intangible assets and other long term
	assets	2,469.81	7,500.00
	Net cash received from the disposal of subsidiaries
	and other business entities
	Cash received relating to other investing activities
	Subtotal for cash inflow from investment activities	4,051,349.81	10,017,500.00
	Cash paid to acquire fixed assets, intangible assets
	and other long-term assets	553,067,747.98	376,134,146.54
	Cash paid for investments	514,844,017.00	206,216,790.37
	Net cash paid for the acquisition of subsidiaries
	and other business entities	270,000,000.00
	Cash paid relating to other investing activities	3,912.09	214,242.20
	Subtotal cash outflows from investment activities	1,337,915,677.07	582,565,179.11
	Net cash flows from investment activities	-1,333,864,327.26	-572,547,679.11

— 59 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

		Amount in	Amount in Prior
Items		Current Period	Period
III.	Cash flows from financing activities:
	Cash received by investors	320,591,396.76	34,258,372.94
	Cash received from borrowings	2,610,600,000.00	1,520,000,000.00
	Cash received from bonds issue
	Other cash received related to financing activities
	Subtotal cash inflows from financing activities	2,931,191,396.76	1,554,258,372.94
	Cash paid for repayments of debts	1,678,406,600.96	821,450,287.20
	Cash paid for distribution of dividends or profits,
	or cash payments for interests	160,102,423.53	112,992,779.06
	Other cash paid related to financing activities	27,529,193.63	3,074,278.99
	Subtotal cash outflows from financing activities	1,866,038,218.12	937,517,345.25
	Net cash flows from financing activities	1,065,153,178.64	616,741,027.69
IV.	Effect of exchange rate movement on cash and
	cash equivalent		-0.25
V.	Net increments of cash and cash equivalent	65,372,091.14	42,444,280.07
	Add: opening balance of cash and cash equivalents	209,547,138.33	167,102,858.26
VI.	Balance of cash and cash equivalent at the end of
	period	274,919,229.47	209,547,138.33

— 60 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		Unit: RMB			Minority	shareholder’s Total owner’s	equity equity	479,985,606.02 2,079,525,750.53						479,985,606.02 2,079,525,750.53		-303,339,868.29 1,263,947,645.49		-235,232,948.24 129,295,280.34		-68,106,920.05 1,161,001,734.93		-82,678,035.18 1,169,371,104.37					14,571,115.13 103,603,698.68	-111,973,068.12	-26,349,369.78				-26,349,369.78
						Undistributed	profits	559,040,213.83						559,040,213.83		284,320,136.95		364,029,509.12											-79,709,372.17	-53,360,002.39			-26,349,369.78
						General risk	preparation
						Surplus	reserves	63,605,357.83						63,605,357.83		53,360,002.39													53,360,002.39	53,360,002.39
						Special	reserves
7. Consolidated statement of changes in owner’s equity	Current amount		Current Period	Owner’s equity attributable to parent company	Other equity instruments Other	Capital Less: treasury comprehensive Preferred Perpetual	Items Capital stock reserves stock incomes shares bonds Others	I. Closing balance of last year 798,466,298.00 179,633,637.80 -1,205,362.95	Add: accounting policy changes	Early error correction	Business combination under common	control	Others	II. Opening balance of this year 798,466,298.00 179,633,637.80 -1,205,362.95	III. Increases and Decreases of This	Year (Decrease is Indicated by “-”) 42,723,765.00 1,186,384,889.98 498,719.46		(I) Total comprehensive incomes 498,719.46	(II) Capital paid in and reduced by	owners 42,723,765.00 1,186,384,889.98	1. Ordinary share paid in by	shareholders 42,723,765.00 1,209,325,374.55	2. Capital paid in by holders of other	equity instruments	3. Amounts of share-based payments		recognized in owners’ equity 89,032,583.55	4. Others -111,973,068.12	(III) Profits distribution	1. Withdrawal of surplus reserves	2. Withdrawal of ordinary risk reserves	3. Distribution to the owner (or	shareholder)	4. Others

— 61 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		Minority	shareholder’s Total owner’s	equity equity														176,645,737.73 3,343,473,396.02
			Undistributed	profits														843,360,350.78
			General risk	preparation
			Surplus	reserves														116,965,360.22
			Special	reserves
Current Period	Owner’s equity attributable to parent company	Other	Capital Less: treasury comprehensive	reserves stock incomes														1,366,018,527.78 -706,643.49
				Others
		Other equity instruments	Preferred Perpetual	shares bonds
				Capital stock														841,190,063.00
				Items	(IV) Internal carry-forward of owners’	equity	1. Surplus reserve converted to capital	(or stock)	2. Surplus reserve converted to capital	(or stock)	3. Surplus reserves for making up	losses	4. Others	(V) Special reserves	1. Withdraw of current period	2. Amount used in the current period	(VI) Others	IV. Closing balance of the period

— 62 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Unit: RMB			Owner’s equity	attributable to	Less: treasury parent	stock company	28,835,655.35 1,273,427,238.41						28,835,655.35 1,273,427,238.41		451,149,950.67 806,098,512.12		-22,628,944.32 231,278,385.93		473,778,894.99 595,720,126.19		469,849,478.62 555,326,722.94					4,716,417.96 41,180,404.84	-787,001.59 -787,001.59	-20,900,000.00				-20,900,000.00
					Capital	reserves	353,794,761.11						353,794,761.11		205,245,452.72		255,009,694.82											-49,764,242.10	-28,864,242.10			-20,900,000.00
				Other	comprehensive	incomes
					Less: treasury	stock	34,741,115.73						34,741,115.73		28,864,242.10													28,864,242.10	28,864,242.10
					Capital	reserves
	Previous Period	Owner’s equity attributable to parent company		Other	Capital Less: treasury comprehensive	reserves stock incomes	438,158,704.60 -102,998.38						438,158,704.60 -102,998.38		-258,525,066.80 -1,102,364.57		-1,102,364.57		117,674,933.20		81,210,946.32					36,463,986.88
						Others
			Other equity instruments		Preferred Perpetual	shares bonds
						Capital stock	418,000,000.00						418,000,000.00		380,466,298.00				4,266,298.00		4,266,298.00
						Items	I. Closing balance of last year	Add: accounting policy changes	Early error correction	Business combination under common	control	Others	II. Opening balance of this year	III. Increases and Decreases of This	Year (Decrease is Indicated by “-”)		(I) Total comprehensive incomes	(II) Capital paid in and reduced by	owners	1. Ordinary share paid in by	shareholders	2. Capital paid in by holders of other	equity instruments	3. Amounts of share-based payments		recognized in owners’ equity	4. Others	(III) Profits distribution	1. Withdrawal of surplus reserves	2. Withdrawal of ordinary risk reserves	3. Distribution to the owner (or	shareholder)	4. Others

— 63 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		Owner’s equity	attributable to	Less: treasury parent	stock company														479,985,606.02 2,079,525,750.53
				Capital	reserves														559,040,213.83
			Other	comprehensive	incomes
				Less: treasury	stock														63,605,357.83
				Capital	reserves
Previous Period	Owner’s equity attributable to parent company		Other	Capital Less: treasury comprehensive	reserves stock incomes		-376,200,000.00		-376,200,000.00										179,633,637.80 -1,205,362.95
					Others
		Other equity instruments		Preferred Perpetual	shares bonds
					Capital stock		376,200,000.00		376,200,000.00										798,466,298.00
					Items	(IV) Internal carry-forward of owners’	equity	1. Surplus reserve converted to capital	(or stock)	2. Surplus reserve converted to capital	(or stock)	3. Surplus reserves for making up	losses	4. Others	(V) Special reserves	1. Withdraw of current period	2. Amount used in the current period	(VI) Others	IV. Closing balance of the period

— 64 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		Unit: RMB			Undistributed Total owner’s	profits equity	500,488,220.42 1,499,546,737.02					500,488,220.42 1,499,546,737.02	453,890,651.72 1,862,903,492.34			533,600,023.89 533,600,023.89	1,355,652,838.23		1,252,049,139.55				103,603,698.68				-79,709,372.17 -26,349,369.78
					Surplus	reserves	63,605,357.83					63,605,357.83	53,360,002.39														53,360,002.39
					Special	reserves
				Other	comprehensive	incomes
			Current Period		Less: treasury	stock
8. Statement of changes in owner’s equities of the parent company	Current amount			Other equity instruments	Capital Capital Preferred Perpetual	Items stock reserves shares bonds Others	I. Closing balance of last year 798,466,298.00 136,986,860.77	Add: accounting policy changes	Early error correction	Business combination under	common control	Others 798,466,298.00 136,986,860.77	II. Opening balance of this year 42,723,765.00 1,312,929,073.23	III. Increases and Decreases of	This Year (Decrease is	Indicated by “-”)	(I) Total comprehensive incomes 42,723,765.00 1,312,929,073.23	(II) Capital paid in and reduced by	owners 42,723,765.00 1,209,325,374.55	1. Ordinary share paid in by	shareholders	2. Capital paid in by holders of	other equity instruments 103,603,698.68	3. Amounts of share-based	payments recognized in	owners’ equity	4. Others

— 65 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

— 66 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Unit: RMB			Undistributed Total owner’s	profits equity	261,610,041.50 1,152,516,838.22					261,610,041.50 1,152,516,838.22	238,878,178.92 347,029,898.80			288,642,421.02 288,642,421.02	79,287,477.78		38,107,072.94				41,180,404.84				-49,764,242.10 -20,900,000.00	-28,864,242.10	-20,900,000.00 -20,900,000.00
			Surplus	reserves	34,741,115.73					34,741,115.73	28,864,242.10														28,864,242.10	28,864,242.10
			Special	reserves
		Other	comprehensive	incomes
	Previous Period		Less: treasury	stock
			Capital	reserves	438,165,680.99					438,165,680.99	-301,178,820.22				75,021,179.78		33,840,774.94				41,180,404.84										-376,200,000.00	-376,200,000.00
				Others
		Other equity instruments	Preferred Perpetual	shares bonds
			Capital	stock	418,000,000.00					418,000,000.00	380,466,298.00				4,266,298.00		4,266,298.00														376,200,000.00	376,200,000.00
				Items	I. Closing balance of last year	Add: accounting policy changes	Early error correction	Business combination under	common control	Others	II. Opening balance of this year	III. Increases and Decreases of	This Year (Decrease is	Indicated by “-”)	(I) Total comprehensive incomes	(II) Capital paid in and reduced by	owners	1. Ordinary share paid in by	shareholders	2. Capital paid in by holders of	other equity instruments	3. Amounts of share-based	payments recognized in	owners’ equity	4. Others	(III)Profits distribution	1. Withdrawal of surplus reserves	2. Withdrawal of ordinary risk	reserves	3. Distribution to the owner (or	shareholder)	4. Others

— 67 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		Undistributed Total owner’s	profits equity													500,488,220.42 1,499,546,737.02
		Surplus	reserves													63,605,357.83
		Special	reserves
	Other	comprehensive	incomes
Previous Period		Less: treasury	stock
		Capital	reserves													136,986,860.77
			Others
	Other equity instruments	Preferred Perpetual	shares bonds
		Capital	stock													798,466,298.00
			Items	(IV)Internal carry-forward of	owners’ equity	1. Surplus reserve converted to	capital (or stock)	2. Surplus reserve converted to	capital (or stock)	3. Surplus reserves for making up	losses	4. Others	(V) Special reserves	1. Withdraw of current period	2. Amount used in the current	period

— 68 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

III. Basic Information of the Company

1. Summary of the Company

Leshi Internet Information & Technology Corp (Beijing) (hereinafter referred to as “the Company”) was formerly known as Beijing Letv Star Information Technology Co., Ltd., which was established in Beijing upon the approval of Beijing Administration for Industry and Commerce in November 2004. The Company’s initial registered capital was RMB 50 million, in which Jia Yueting (a natural person) contributed RMB 45 million, accounting for 90.00% of the Company’s registered capital, Jia Yuefang (a natural person) contributed RMB100,000, accounting for 0.20% of the Company’s registered capital and Xbell Union Communication Technology (Beijing) Co., Ltd. invested RMB 4.9 million, accounting for 9.80% of the Company’s registered capital. In August 2010, the Company, approved by China Securities Regulatory Commission (CSRC), issued 25 million RMB common stocks to the public for the first time and listed in Shenzhen Stock Exchange. After the public issue, transferred allotted shares and exercise of stock options, the Company’s registered capital is RMB 841,190,063.00 at the end of the reporting period.

Registration Number of the Company’s Business License: 110000007760467

Legal Representative: Jia Yueting

The Company’s registered address: Room No. 6184, Floor 6, Building 19, No. 68, Xueyuan South Road, Haidian District, Beijing City.

Business scope: licensed business items: internet information services (including issuance of internet advertisements); information services in the second value-added telecommunication services (excluding fixed telephone information services and internet information services); production and publication of cartoons, features, TV entertainment shows, no broadcasting and TV programs such as political news, similar features and special columns (the broadcasting and TV program and television production license is valid until January 24th, 2016); development of computer hardware and software; computer system services; sales of computer hardware, software and auxiliary equipment, clothing, shoes and hats, leather products, textiles, daily necessities, toys, stationery, sports goods, household electrical appliances, jewelry, cars and auto parts. (Any project that needs to be approved by law can only be carried out according to the approved items after the approval of relevant authorities.)

The Company’s main business is to provide network video services, network terminal equipment and value-added services of video platform.

Issue date of the financial report authorized: March 27th, 2015

2. Scope of consolidated financial statements

As of December 31st, 2014, there had been 12 subsidiaries in the scope of the Company’s consolidated financial statement: Leshi Zhixin Electronic Technology (Tianjin) Limited, LeTV (Tianjin) Information Technology Co., Ltd., Dongyang Flower Film & TV Co., Ltd., Letv Information

— 69 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Technology (Hong Kong) Co., Ltd., LeTV Sports Culture Development (Beijing) Co., Ltd., Letv Cloud Computing Co., Ltd., Letv New Media Culture (Tianjin) Co., Ltd., Beijing Letv Streaming Media Advertising Co., Ltd., Letv (Shanghai) Information Technology Co., Ltd., Letv Cultural Development (Beijing) Co., Ltd., Letv Fortune (Beijing) Information Technology Co., Ltd. and Letv E-commerce (Beijing) Co., Ltd.

Refer to Notes “VIII. Change of Consolidation Scope” and “IX. Equity in Other Bodies” for details of the scope and change conditions of the consolidation scope.

IV. Preparation Basis for Financial Statements

1. Basis of preparation

The Company shall, on the basis of continuous operation, recognize and measure the actually occurred transactions and events according to the Accounting Standards for Business Enterprises and the application guide and the provisions, and then prepare financial statements.

2. Continuous operation

The Company has evaluated the continuous operation ability in 12 months since the end of the reporting period and has not found any matter that affects the Company’s continuous operation ability, so it is reasonable that the Company prepares the financial statement based on the continuous operation.

V. Significant Accounting Policy and Estimate

The following important accounting policy and estimate of the Company are determined according to Accounting Standards for Business Enterprises . Businesses unmentioned shall be performed according to relevant accounting policies in Accounting Standards for Business Enterprises .

1. Declaration for complying with accounting standards for business enterprises

The financial statement of the Company is prepared in accordance with the requirements of Accounting Standards for Business Enterprises , which truly and completely reflects the financial status, operating results, changes in owners’ equity, cash flow and other relevant information of the Company.

2. Fiscal period

The Company’s financial year begins on 1 January and ends on 31 December of the Gregorian calendar.

3. Operating cycle

The Company’s normal operating cycle is one year.

— 70 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Recording currency

The Company adopts RMB as the recording currency.

1. Accounting methods for business combinations under the same control and not under common control

(1) Business combination under common control

The assets and liabilities that the Company obtains in a business combination shall be measured on the basis of the book value of the combined party in the consolidated financial statement of the final controlling party on the combining date. Different accounting policies used by the combined party from the Company before the business combination shall be unified based on the principle of importance, i.e. the book value of the combined party’s assets and liabilities shall be adjusted in accordance with the accounting policies of the Company. In case of a difference between the book value of net asset that the Company obtains in a business combination and the book value of the paid consideration, the capital reserve (capital premium or capital stock premium) shall be adjusted. The surplus reserves and undistributed profits shall be offset in turn if the capital reserve (capital premium or capital stock premium) is insufficient to be written off.

(2) Business combination not under common control

Identifiable assets and liabilities which are acquired by the Company from the combination shall be measured at fair value on the date of purchasing. Different accounting policies used by the purchased party from the Company before the business combination shall be unified based on the principle of importance, i.e. the book value of the purchased party’s assets and liabilities shall be adjusted in accordance with the accounting policies of the Company. In case that the combination cost on the purchasing date is higher than the difference between the fair values of the identifiable assets and liabilities that the Company obtains in a business combination from the purchased party, it shall be recognized as goodwill; if the combination cost is lower than the difference between the fair values of the identifiable assets and liabilities obtained in a business combination from the purchased party, firstly review the combination cost and the fair values of the identifiable assets and liabilities obtained in the business combination from the purchased party, and if the reviewed combination cost is still lower than the fair values of the identifiable assets and liabilities obtained from the purchased party, the difference shall be determined as the current combination profits and losses.

6. Preparation method for consolidated financial statements

(1) Determination of consolidation scope

The consolidation scope of consolidated financial statement shall be determined on the basis of control, including not only subsidiaries determined according to the voting right (or similar voting rights) or in combination with other arrangements, but also the structured body determined based on the arrangement of one or more contracts.

— 71 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Control refers to the control power of the Company over the investee. Through the control, the Company can obtain variable return by participating in relevant activities of the investee and can affect the return amount by using the control power to the investee. A subsidiary refers to a main body under the control of the Company (including enterprises, separable parts in the investee, and structured bodies controlled by enterprises), and a structured body refers to a body designed when the voting right or similar rights are not considered as the decisive factors during determination of the controlling party (note: sometimes it is also referred to as the special purpose entity).

(2) Preparation method for consolidated financial statements

The Company shall prepare consolidated financial statements based on its and its subsidiaries’ financial statements according to other relevant data.

During preparation of consolidated financial statements, the Company shall consider the whole enterprise group as an accounting entity on the basis of the recognition, measurement and presentation requirements of relevant accounting standards for business enterprises and in accordance with the unified accounting policies, reflecting the enterprise group’s overall financial status, operating results and cash flows.

• ① Combine the assets, liabilities, owners’ equities, revenues, expenses, cash flows, etc. of the parent company and subsidiaries.

• ② Offset the long-term equity investments of the parent company in the subsidiaries and the share that the parent company enjoys in the owner’s equity of the subsidiaries.

• ③ Offset the influence of internal transactions between the parent company and the subsidiaries and among the subsidiaries. In case that the internal transaction suggests impairment losses of relevant assets, the total amount of the partial loss shall be confirmed.

• ④ Adjust special transactions in the angle of enterprise group.

(3) Increase or decrease in subsidiaries in the reporting period

• ① Increase in subsidiaries or businesses

• A. Subsidiaries or businesses increased from business combination under common control

  • (a) During the preparation of consolidated balance sheet, the opening balance of consolidated balance sheet shall be adjusted and relevant items in the comparative statement shall also be adjusted and they will be regarded as reporting entities after combination and always exist since the control of final controller.

  • (b) During the preparation of consolidated profit statement, the income, expense and profit of the subsidiary from the beginning of the current period of business

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combination to the end of the reporting period shall be included in the consolidated profit statement, at the same time, relevant items in the comparative statement shall be adjusted, and they will be regarded as reporting entities after combination and always exist since the control of final controller.

     - (c) During the preparation of consolidated cash flow statement, the cash flow of the subsidiary from the beginning of the current period of business combination to the end of the reporting period shall be included in the consolidated cash flow statement, at the same time, relevant items in the comparative statement shall be adjusted, and they will be regarded as reporting entities after combination and always exist since the control of final controller.

  - B. Subsidiaries or businesses increased from business combination not under common control

     - (a) Do not adjust the opening balance when preparing a consolidated balance sheet.

     - (b) Include the income, expense and profit of the subsidiary from the date of acquisition to the end of the reporting period into the consolidated profit statement when preparing a consolidated profit statement.

     - (c) Include the cash flow of the subsidiary incurred from the date of acquisition to the end of the reporting period into the consolidated cash flow statement when preparing a consolidated cash flow statement.

• ② Disposal of subsidiary or business

  • A. Do not adjust the opening balance when preparing a consolidated balance sheet.

  • B. Include the income, expense and profit of the subsidiary from the beginning of business to the disposal date into the consolidated profit statement when preparing a consolidated profit statement.

  • C. Include the cash flow of the subsidiary incurred from the beginning of business to the disposal date into the consolidated cash flow statement when preparing a consolidated cash flow statement.

• (4) Special consideration in combination offset

• ① The long-term equity investment of the parent company held by a subsidiary shall be regarded as the treasury stock of the Company and as deduction item of the owner’s equity. It should be stated as “minus: treasury stock” under owner’s equity in the consolidated balance sheet.

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Long-term equity investments held by subsidiaries shall be offset with the share enjoyed in the owner’s equity of the subsidiaries according to the Company’s offset method for subsidiaries’ equity investments.

• ② “Special reserves” “and “general risk preparation” shall be recovered according to the shares attributable to the parent company’s owners after the long-term equity investment is offset mutually with the owner’s equity of the subsidiary as they are not paid-in capitals (or capital stocks) or capital reserves and also different from surplus reserves and undistributed profits.

• ③ If the fair value of the assets and liabilities in the consolidated balance sheet temporarily differs from the tax basis of the subject of tax payment it belongs because of the neutralization of the unrealized internal transaction gains and losses, the deferred tax assets or deferred tax liabilities in the consolidated balance sheet should be confirmed and the income tax expenses in the consolidated profit statement should be adjusted, except the transactions or matters that are directly included into the owners’ equity and the deferred income taxes related to business combination.

• ④ Gains or losses on internal transaction unrealized when the Company sells assets to a subsidiary shall be fully offset with the “net profit attributable to the parent company’s owners”. Gains or losses on internal transaction unrealized when a subsidiary sells assets to the Company shall be offset between the “net profit attributable to the parent company’s owners” and the “minority interest income” in accordance with the allocation proportion of the Company to the subsidiary. Gains or losses on internal transaction unrealized when subsidiaries sell assets to each other shall be offset with the “net profit attributable to the parent company’s owners” and “minority shareholders profit and loss” in accordance with the allocation proportion of the Company to the seller subsidiary.

• 5 If the loss shared by minority shareholders in a subsidiary exceeds the share enjoyed by minority shareholders in the subsidiary’s owner’s equity at the beginning of the period, the balance shall be written down with the minority shareholders’ equity

(5) Accounting treatment of special transaction

• ① Acquisition of equity of minority shareholders

When the Company purchases the subsidiary equity owned by the subsidiary’s minority shareholders, in an individual financial statement, the investment cost for purchase of the equity for the long-term equity investment shall be measured at fair value of the paid consideration. In the consolidated financial statement, the balance between the newly increased long-term equity investment due to purchase of minority interest and the due net assets share continuously calculated based on the newly increased shareholding ratio from acquisition date or merger date of the subsidiary shall offset against the capital reserve (capital premium or capital stock premium). The surplus reserves and undistributed profits shall be offset in turn if the capital reserve is insufficient to be written off.

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• ② Obtaining control over the subsidiary by several transactions in steps

• A. For business merger under the common control that is realized by several transactions

If it belongs to package deal, the Company will deal with various transactions as a transaction to obtain control over the subsidiary. In individual financial statement, for each transaction conducted before the merger date, the equity investment shall be recognized as long-term equity investment and its initial investment cost shall be determined as per the book value share of the net assets of the merged party calculated at corresponding shareholding ratio in consolidated financial statement of the final controller. The capital reserve (capital premium or capital stock premium) shall be adjusted according to the balance between the initial cost of the long-term equity investment and book value of paid consideration. The surplus reserves and undistributed profits shall be offset in turn if the capital reserve (capital premium or capital stock premium) is insufficient to be written off. In the subsequent measurement, the long-term equity investment shall be checked in accordance with the cost method, but the preparation of consolidated financial statements is not involved. The initial cost of the Company for long-term equity investment in subsidiary on the merger date shall be determined as per the book value share of the net assets of the merged party calculated at cumulative shareholding ratio for subsidiary in the consolidated financial statement of the final controller. The capital reserve (capital premium or capital stock premium) shall be adjusted according to the balance between the initial investment cost and the sum of book value of long-term equity investment before the merger and book value of newly paid consideration further obtained on the merger day. The surplus reserves and undistributed profits shall be offset in turn if the capital reserve (capital premium or capital stock premium) is insufficient to be written off. Meanwhile, the preparation of the consolidated financial statement on the merger date and the presentation of the Company in the consolidated financial statement shall be deemed that all parties involved in the merger adjusted the current state/ existence when the final controller began to control it.

If the clauses, condition and economic impact of each transaction conform to one or more of the following cases, these transactions shall be handled in an accounting way as a package deal:

• (a) These transactions are concluded simultaneously or after the consideration of the mutual influence.

• (b) These transactions can lead to a complete commercial result only when they are in their entirety.

• (c) The occurrence of a transaction relies on the occurrence of at least another transaction.

• (d) A transaction alone is deemed uneconomic but economic when together with other transactions.

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If it belongs to package deal, each transaction of the Company conducted before the merger date shall be recognized as financial assets (financial asset calculated in fair value with change included in current profits and losses or financial asset available for sale) in accordance with the fair value of paid consideration or long-term equity investment measured in accordance with the equity method. The initial cost of the Company for the long-term equity investment in the individual financial statement on the merger date shall be determined as per the book value share of due net assets of the subsidiary in the consolidated financial statement of the final controller. The capital reserve (capital premium or capital stock premium) shall be adjusted according to the balance between the initial investment cost of long-term equity investment on the merger date and the sum of book value of long-term equity investment before the merger and book value of newly paid consideration further obtained on the merger date. The surplus reserves and undistributed profits shall be offset in turn if the capital reserve (capital premium or capital stock premium) is insufficient to be written off.

The presentation of the Company in the consolidated financial statement shall be deemed that all parties involved in the merger adjusted the current state/ existence when the final controller began to control it. When the consolidated financial statement is prepared, the time point not earlier than the control of the merging party and the merged party by final controller shall be taken, relevant assets and liabilities of the merged party shall be included into the comparative statement of consolidated financial statement of the merging party and the increased net assets due to merger shall be shown in relevant item under adjustment of owner’s equity in comparative statement. If the part of retained income realized by the merged party before the merger attributable to the merging party is not recovered in full amount in the consolidated financial statement because the balance of capital reserve (capital premium or capital stock premium) of the merging party is insufficient, the Company shall specify the condition in the notes to the statement, including the retained income realized by the merged party before the merger, amount attributable to the Company and the amount in the consolidated financial statement not transferred in the retained income due to insufficient balance of capital reserve.

For the equity investment held by the merging party before it obtained the control over the merged party which is checked by equity method, changes in relevant profits and losses, other comprehensive incomes and other owner’s equities recognized from the later one of the date when the original equity is obtained and the date when the merging party and the merged party are under the final control of the same party to the merger date shall respectively be used to offset the retained income at the beginning period of the comparative statement.

• B. For business merger not under the common control that is realized by several transactions

If it belongs to package deal, the Company will deal with various transactions as a transaction to obtain control over the subsidiary. In individual financial statement, for each transaction conducted before the merger date, the equity investment shall be recognized as long-term equity investment and its initial investment cost shall be determined as per the

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fair value of paid consideration. In the subsequent measurement, the long-term equity investment shall be checked in accordance with the cost method, but the preparation of consolidated financial statements is not involved. As of the merger date, the sum of book value of originally held long-term equity investment and newly added investment cost (book value of paid consideration further obtained) in the individual financial statement shall be regarded as the initial cost of long-term equity investment on the merger date. In the consolidated financial statement, initial investment cost shall be used to offset the attributable share of fair value of subsidiary’s’ identifiable net assets and the balance shall be recognized as goodwill or included in the current profits and losses of the merger.

If it belongs to package deal, each transaction of the investor conducted before the merger date shall be recognized as financial assets (financial asset calculated in fair value with change included in current profits and losses or financial asset available for sale) in accordance with the fair value of paid consideration or long-term equity investment measured in accordance with the equity method. As of the merger date, the sum of book value of originally held equity investment (financial asset or long-term equity investment checked as per the equity method) and newly added investment cost in the individual financial statement shall be regarded as the initial cost of long-term equity investment checked as per the cost method. In the consolidated financial statement, for held equity from the purchased party before the purchase date, measurement shall be restarted at fair value on the date of purchasing. Balance between fair value and book value shall be included into the current income from investment. For the held equity from the purchased party before the date of purchasing which involves other comprehensive incomes measured with equity method, the related other comprehensive incomes shall be changed into the current incomes from investment on the date of purchasing, except from other comprehensive incomes due to changes in net debts or assets caused by remeasurement and re-definition of benefit plan by the investee. The Company shall disclose the fair value of acquiree’s equity held before the purchase date on the purchase date, and the amount of related gains or losses recalculated based on the fair value in the notes.

③ The Company’s disposal of long-term equity investment for subsidiary without control loss

The Company can dispose the long-term equity investment of subsidiary partially without losing its control right. During preparation of consolidated financial statement, disposal of price and long-term equity investment can enjoy the difference of net assets of subsidiary as result of continuous calculation since the date of purchasing or acquisition, adjust capital reserve (capital premium or capital stock premium) and adjust retained incomes if capital reserve is not sufficient for offset.

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• ④ The Company’s disposal of long-term equity investment for subsidiary with control loss

A. Disposal by a transaction

If the Company losses control over the investee due to partial disposal of equity investment or other reasons, during the preparation of consolidated final statement, the remaining equity is re-measured at fair value on the date when the control is lost. The difference between the sum of consideration received for disposal of equity interest and the fair value of remaining equity interest less the net assets attributable to the original subsidiary calculated continuously since the purchase date or merger date based on shareholding percentage before disposal are recognized in investment gain in the period when the control is lost and offset for the goodwill (note: if the original enterprises merged are not under the common control and there is goodwill).

Besides, the changes in other comprehensive incomes related to equity investment in the subsidiary and other owner’s equities shall be transferred to current profits and losses at the time of control loss, except from other comprehensive incomes due to changes in net debts or assets caused by remeasurement and re-definition of benefit plan by the investee.

B. Disposal in steps by transactions

In the consolidated financial statement, whether transaction by steps is a package deal shall be decided first.

If the transaction by steps does not belong to the package deal, various transactions conducted before the loss of control over subsidiary shall be disposed as per relevant regulations of “parent company’s disposal of long-term equity investment for subsidiary without control loss”.

If the transaction by steps belongs to package deal, various transactions shall be disposed in an accounting way as a transaction for subsidiary disposal with control loss. For each transaction conducted before control loss, the balance between the disposal price and corresponding net asset share of disposed investment over the subsidiary shall be recognized as other comprehensive income in the consolidated financial statement and transferred to current profits and losses at the time of control loss together.

5 Equity ratio of parent company diluted due to capital increase of subsidiary’s minority shareholders

The equity ratio of parent company over the subsidiary was diluted because the subsidiary’s other shareholders (minority shareholders) increased their capital for the subsidiary. In the consolidated financial statement, the capital reserve (capital premium or capital stock premium) shall be adjusted according to the balance between the share of book value of subsidiary’s net assets before capital increase calculated based on the parent

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company’s equity ratio before capital increase and the share of book value of subsidiary’s net assets after capital increase calculated based on the parent company’s equity ratio after capital increase and the retained incomes shall be adjusted if the capital reserve (capital premium or capital stock premium) is insufficient to be written off.

7. Determination of cash and cash equivalent

The term “cash” refers to cash of the Company on hand and deposits that are available for payment at any time. Cash equivalents refer to short-term (usually maturing within three months from the purchasing date) investments that have strong liquidity and insignificant risk of changes in value and are readily convertible to known amounts of cash.

8. Foreign currency business and foreign currency transformation

• (1) Determination method for foreign currency conversion during foreign currency transaction

Foreign currency transactions of the Company incurred during initial recognition are translated to recording currency by using the spot exchange rate at the transaction date or exchange rate approximate to the spot exchange rate.

(2) Conversion method for foreign currency monetary items on the balance sheet date

The foreign currency monetary items on the balance sheet date shall be translated at the spot exchange rate on the balance sheet date. The balance of exchange arising from the difference between the spot exchange rate on the balance sheet date and the spot exchange rate at the time of initial recognition or prior to the balance sheet date shall be recorded into the profits and losses at the current period.

(3) Conversion method for foreign currency statements

Before converting the corporate overseas business financial statements, adjust the accounting period and accounting policies for overseas business first so that they are in line with the corporate accounting period and accounting policies, prepare financial statements of corresponding currency (currency besides recording currency) according to the adjusted accounting period and accounting policies and then convert the overseas business financial statements in accordance with the following methods:

• ① The asset and liability items in the balance sheets shall be translated at a spot exchange rate on the balance sheet date. Among the owner’s equity items, except the ones as “undistributed profits”, others shall be translated at the spot exchange rate at the time when they are incurred.

• ② The income and expense items in the profit statements shall be translated at the spot exchange rate of the transaction date or exchange rate approximate to the spot exchange rate.

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• ③ The balance arisen from the conversion of foreign currency statements shall be separately presented as “other comprehensive incomes” under the owner’s equity item of the consolidated balance sheet during the preparation of consolidated financial statement.

• ④ The foreign currency cash flow and cash flow of overseas subsidiary shall be translated at the spot exchange rate of the cash flow occurrence date or exchange rate approximate to the spot exchange rate. The effect of a change in exchange rate on cash shall, as an adjustment item, separately presented in the cash flow statement.

9. Financial instruments

(1) Classification of financial assets

• ① Financial assets calculated in fair value with change included in current profits and losses

These assets include trading financial assets and financial assets directly designated to be calculated in fair value with change included in current profits and losses and the former mainly refers to the stocks, bonds, funds and investment for derivative instruments not used as effective hedging instruments held by the Company for sales in recent years. Such assets shall be regarded as initial recognition amount in accordance with the fair value when obtained during the initial measurement and relevant transaction costs shall be included in current profits and losses at the occurrence. If the cost paid includes the cash dividends declared but not allocated, or bond interest uncollected whose interest payment period is due, such cash dividends and bond interest shall be separately recognized as receivables. Interest or cash dividends acquired during holding time shall be recognized as income from investment. The Company will calculate such financial assets in fair value and include their change in current profits and losses on the balance sheet date. During the disposal of such financial assets, the balance between their fair value and original recorded amount shall be recognized as investment income, and meanwhile, the profits and losses of changes in fair value shall be adjusted.

② Held-to-maturity investments

These investments refer to national bond, corporate bond, etc. with a fixed date of maturity, a fixed or determinable amount of repo price and which the Company holds for a definite purpose or the enterprise is able to hold until its maturity. For such financial assets, the sum of the fair value when obtained and related transaction costs shall be regarded as the initial recognition amount. The uncollected bond interest in paid cost whose interest payment period is due shall be separately recognized as receivables. The interest income of held-to-maturity investments acquired during holding time shall be calculated based on the amortized cost and effective interest rate and included in the income from investment. During the disposal of held-to-maturity investments, the balance between the acquired price and book value of the investment shall be included in the income from investment.

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③ Receivables

Receivables mainly include accounts receivable and other accounts due. Accounts receivable refer to receivables formed for the Company’s sale of product or provision of labor service, and the contract or agreement price receivable from the Buyer shall be regarded as the initial recognition amount of the accounts receivable.

④ Financial assets available for sale

These assets refer to those not classified as financial assets calculated in fair value with change included in current profits and losses, held-to-maturity investments, loans or receivables by the Company. For such financial assets, the sum of the fair value when the financial assets were obtained and related transaction costs shall be regarded as the initial recognition amount. If the cost paid includes the bond interest uncollected whose interest payment period is due or cash dividends declared but not distributed, such bond interest and cash dividends shall be separately recognized as receivables.

If the financial assets available for sale are foreign currency monetary financial assets, their exchange gain or loss generated shall be included into the profits and losses of the current period. The interests of investment for sellable debt instruments calculated according to the actual interest rate method shall be recorded into the profits and losses of the current period. The cash dividends of the sellable equity instrument investments shall be recorded into the profits and losses of the current period when the investee announces the distribution of dividends. The financial assets available for sale on the balance sheet date shall be calculated in fair value and their change shall be included in other comprehensive incomes. During the disposal of financial assets available for sale, the balance between the acquired price and book value of the financial assets shall be included in the income from investment; moreover, the accumulated amount of changes in fair value of the owner’s equity originally included which corresponds to the amount of disposed part shall be transferred out and recorded into the income from investment.

(2) Classification of financial liabilities

• ① Financial liabilities calculated in fair value with change included in current profits and losses include transactional financial liabilities and designated financial liabilities calculated in fair value with change included in current profits and losses; such financial liabilities are measured in fair value at initial recognition, related transaction costs are directly included in current profits and losses and the changes in fair value are included in current profits and losses on the balance sheet date.

• ② Other financial liabilities refer to those not classified as financial liabilities calculated in fair value with change included in current profits and losses.

(3) Re-classification of financial assets

Where the Company has the intention of holding or the ability to make changes so that an investment is no longer suitable to be classified as a held-to-maturity investment, such investment

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shall be re-classified as a financial asset available for sale, and a subsequent measurement shall be made at its fair value. Where the amount of partial held-to-maturity investment for sale or reclassification is relatively great and such occasion is beyond the exceptional cases specified in Article 16 of Accounting Standard for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments , making the remaining part of the investment no longer suitable to be classified as a held-to-maturity investment, the Company shall reclassify such part as a financial asset available for sale and make subsequent measurement at its fair value. However, this financial asset shall not be classified as a held-to-maturity investment within the current accounting year and the following two complete accounting years.

The balance between the book value and fair value of the said investment on the reclassification day shall be included in other comprehensive incomes and when the financial asset available for sale is impaired or transferred out when it is terminated from recognizing, it shall be recorded into the profits and losses of the current period.

(4) Transfer of financial assets

The transfer of a financial asset refers to the following two circumstances:

• A. Transfer the right for receiving the cash flow of the financial asset to another party;

• B. Transfer the whole or partial financial asset to another party, but reserve the right to receive the cash flow of the financial asset and undertake the contractual obligation to pay the cash flow received to one or more payees.

• ① Termination of recognition for transferred financial asset

If all of the risks and rewards related to the ownership of financial asset have been transferred to the transferee, or if the Company has waived its control over the financial asset and it neither transferred nor retained nearly all of the risks and rewards related to the ownership of the said asset, the recognition of the financial asset shall be terminated.

When an enterprise judges whether its control over the transferred financial asset has been given up, the enterprise shall pay more attention to the transferee’s actual ability of selling the financial asset. If the transferee is able to independently sell the entire transferred financial asset to a third party without any relationship with it as an associated party and there is no additional conditions to limit the sale, it shows that the enterprise has given up its control over the financial asset.

The Company pays more attention to the nature of financial asset transfer when it decides if the financial asset transfer meets the requirements for termination of recognition of financial asset.

For financial asset that is entirely transferred and meets the conditions of derecognition, the difference between the following two items is recorded in current profits and losses:

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• A. The book value of the transferred financial asset;

• B. Sum of the consideration received due to transfer and the accumulated amount of changes in the fair value directly reckoned in the owner’s equity (involving the occasion when the transferred financial asset is a financial asset available for sale)

If the transfer of partial financial asset satisfies the conditions to stop the recognition, the entire book value of the transferred financial asset shall, between the portion whose recognition has been stopped and the portion whose recognition has not been stopped (in this case, the reserved servicing asset shall be deemed as a part of the financial asset whose recognition has not been stopped), be apportioned according to their respective relative fair value, and the difference between the amounts of the following 2 items shall be included into the profits and losses of the current period:

• A. Book value of the derecognized part;

• B. Sum of the consideration of the part whose recognition is terminated and the accumulated amount of changes in fair value originally included in the owner’s equity which corresponds to the amount of the part whose recognition is terminated (involving the occasion when the transferred financial asset is a financial asset available for sale)

• ② Continuous involvement of transferred financial assets

If the enterprise does not transfer nor retain all the risks and rewards of the financial asset ownership, and does not give up the control of the financial asset, the related financial asset shall be recognized in accordance with the extent of the continuous involved transferred financial asset and recognized for related liability. The extent of the continuous involved transferred financial asset refers to the risk of the enterprise from the value change of the financial asset.

The term “continuous involvement in the transferred financial asset” shall refer to the risk level that the enterprise faces resulting from the change of the value of the financial assets.

• ③ Continuous recognition of transferred financial asset

If nearly all of the risks and rewards related to the ownership of the transferred financial asset are retained, the transferred financial asset as a whole shall be recognized continuously and the consideration received shall be recognized as a financial liability.

The financial asset shall not be used to offset the relevant financial liabilities it has recognized. In the subsequent accounting periods, the enterprise shall continue to recognize the income generated from the financial asset and the cost arising from the financial liability. For transferred financial asset measured by amortized cost, related recognized liabilities shall not be designated as financial liabilities calculated in fair value with change included in current profits and losses.

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• (5) Termination of recognition for financial liabilities

For financial asset whose present obligation has been fully or partially relieved, all or part of the financial asset is derecognized.

Neither the recognition of the financial liability nor the recognition of the transferred assets shall be terminated if an enterprise transfers its assets to be used for repayment of financial liability to certain organization or use them to set up a trust and there is still current obligation for the enterprise to repay the liability.

If the enterprise and the creditor sign the agreement to substitute the new financial liability mode for the existing financial liability and the essences of the contract provisions for the new financial liability and existing financial liability are different, the recognition of existing financial liability can be terminated and the new financial recognition be recognized at the same time.

Where an enterprise makes substantial revisions to some or all of the contractual stipulations of the existing financial liability, it shall terminated the recognition of the existing financial liability or part of it, and at the same time recognize the financial liability after the modification of the contractual stipulations as a new financial liability.

Where the recognition of a financial liability is totally or partially terminated, the enterprise concerned shall include into the profits and losses of the current period the gap between the carrying amount which has been terminated from recognition and the considerations it has paid (including the non-cash assets it has transferred out and the new financial liabilities it has assumed.

• (6) Impairment test method for financial assets and withdrawing method of provision for impairment

• ① Objective evidences showing the impairment of the financial asset:

  • A. A serious financial difficulty occurs to the issuer or debtor;

  • B. The debtor breaches any of the contractual stipulations, for example, fails to pay or delays the payment of interests or the principal, etc.;

  • C. The creditor makes any concession to the debtor which is in financial difficulties for economic or legal factors, etc.;

  • D. The debtor is likely to become bankrupt or carry out other financial reorganizations;

  • E. The financial asset can no longer continue to be traded in the active market due to serious financial difficulties of the issuer;

  • F. It is impossible to identify whether the cash flow of a certain asset within a certain combination of financial assets has decreased or not. But after making an overall appraisal according to the public data available, it is found that the predicted future cash flow of the said combination of financial assets has indeed decreased since it was initially recognized and such decrease can be measured;

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• G. Any seriously disadvantageous change has occurred to technical, market, economic or legal environment, etc. wherein the debtor operates its business, which makes the investor of an equity instrument unable to take back its investment;

• H. Where the fair value of the equity instrument investment drops significantly or not contemporarily;

• I. Other objective evidences showing the impairment of the financial asset.

• ② Impairment test for financial assets (excluding receivables)

• A. Impairment test for held-to-maturity investments

Where a held-to-maturity investment is impaired, the carrying amount of the said investment shall be written down to the current value of the predicted future cash flow (excluding the loss of future credits not yet occurred), and the amount as written down shall be recognized as the asset impairment loss and included in the profits and losses of the current period.

The current value of the predicted future cash flow shall be determined according to the discounting at the original actual interest rate of the held-to-maturity investment, with consideration of the value of related guaranty (but the expenses arising from the acquisition or sale of the guaranty shall be deducted). Original actual interest rate is the actual interest rate determined based on the calculation at the initial recognition of the held-to-maturity investment. With regard to the held-to-maturity investment with floating interest rate, the current actual interest rate as stipulated in the contract shall be adopted as the discount rate in the calculation of current value of future cash flow.

The impairment loss shall be still calculated at the original actual interest rate of the financial asset calculated before the modification of the terms even if the contract terms were re-discussed or modified due to the financial difficulties of the debtor or the issuers of the financial asset.

Where any held-to-maturity investment is recognized as having suffered from any impairment loss, if there is any objective evidence proving that the value of the said investment has been restored, and it is objectively related to the events that occur after such loss is recognized (for example, the credit rating of the debtor has been elevated, etc.), the impairment-related losses as originally recognized shall be reversed and included in the profits and losses of the current period.

After an impairment of a held-to-maturity investment, the interest incomes shall be calculated and recognized with the discount rate adopted for discounting of future cash flow during determination of impairment loss as the interest rate.

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• B. Impairment test of financial assets available for sale

On the balance sheet date, the Company shall analyze the impairment situation of financial assets available for sale and judge whether the fair value of financial assets will continue to decline. Normally if the decline of fair value of financial assets available for sale at the end of the period relative to the cost has reached or exceeded 50% or if the decline duration has reached or exceeded 12 months, where the downtrend is predicted as non-temporary with comprehensive consideration of all related factors, the financial assets available for sale can be considered as having suffered from impairment and the impairment loss shall be recognized. Where the financial asset available for sale is impaired, all the accumulated losses arising from the decrease of fair value originally directly included in the owner’s equity shall be transferred out and included in the impairment loss of asset during the recognition of impairment loss.

Whether the financial asset of debt instruments available for sale is impaired can be analyzed and decided with reference to the aforementioned investment for debt instruments available for sale.

Impairment losses of available-for-sale equity instrument investment shall not be reversed through profits and losses.

After an impairment of a held-to-maturity investment, the interest incomes shall be calculated and recognized with the discount rate adopted for discounting of future cash flow during determination of impairment loss as the interest rate.

As for the debt instruments available for sale whose impairment losses have been recognized, if, within the accounting period thereafter, the fair value has risen and are objectively related to the events taking place after the original impairment losses were recognized, the originally recognized impairment losses shall be reversed and included in the profits and losses of the current period.

(7) Recognition method for fair value of financial assets and financial liabilities

The Company measures the fair value of related assets and liabilities based on the price in main market. If there is no main market, the Company will measure the fair value of related assets and liabilities based on the price of the most favorable market.

Main market refers to the market in which the transaction price of related assets or liabilities is the highest and the transaction is the most active; the most favorable market refer to the market in which related assets can be sold at the highest price or related liabilities can be transferred at the lowest price with consideration of the transaction cost and transport cost. The Company adopts the assumption used by the market participants during the pricing for the assets or liabilities to maximize their economic interests.

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APPENDIX II

1. Impairment test method for receivables and withdrawing method of provision for impairment

The book value of the receivables shall be checked on the balance sheet date and where there is any objective evidence showing that the receivables have been impaired, the impairment provision shall be withdrawn.

(1) Receivables that are individually significant and have bad debts provision separately drawn

The Company will recognize a certain receivable with amount accounting for more than 10.00% of the amount of all receivables as a single item with significant amount, for which impairment test will be done separately. If there is objective evidence proving that it is impaired, the balance of its book value minus current value of its future cash flow shall be recognized as the impairment loss and corresponding bad-debt provision shall be withdrawn accordingly.

Where there is a very small gap between the predicted future cash flow of a short-term account receivable item and the current value thereof, the predicted future cash flow is not required to be capitalized when determining the relevant impairment-related losses.

(2) Receivables with provision for bad debt withdrawn as per credit risk characteristics

Combination 1: the Company combines the receivables with significant amount of single items separately tested as not suffering from impairment and receivables with insignificant amount of single items on the basis of credit risk features according to the aging, divide the aging into sections based on the period from the month and year when the receivables took place to the deadline of the statements, determine the withdrawal proportion of the receivables’ combination within the aging section in the bad-debt provision based on the actual loss rate for receivables within the aging sections with combination of current condition, and accordingly calculate the bad-debt provision to be withdrawn.

The proportions of the receivables’ combination within various aging sections in the bad-debt provision are detailed as follows:

	Withdrawing	Withdrawing
	Proportion of	Proportion of
	Receivables	Other Receivables
Aging	(%)	(%)
Within one year	3.00	3.00
1-2 years	10.00	10.00
2-3 years	25.00	25.00
3-5 years	50.00	50.00
More than 5 years	100.00	100.00

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APPENDIX II

Combination 2: the Company classifies the receivables whose possibility of recovery is basically determined as a combination since basically they never suffer from impairment and use the difference between the recoverable amount of the receivables and book balance as the withdrawal base number to withdraw the impairment provision.

(3) Receivables that are not individually significant but have bad debts provision separately drawn

For receivables whose single item amount is insignificant, if there was objective evidence proving that they were impaired, their actual condition cannot be reflected by the bad-debt provision withdrawn based on aging analysis method. In this case, the Company will conduct impairment test separately, recognize the impairment loss based on the balance of their fair value minus current value of their future cash flow and withdraw corresponding bad-debt provision accordingly.

11. Inventories

(1) Classification of inventories

The term “inventories” refer to finished products or merchandise possessed by the Company for sale in the daily business, or work in progress in the process of production, or materials and supplies to be consumed in the process of production or offering labor service, including raw materials, consigned finished goods, goods in stock and turnover materials.

(2) Valuation method of sending inventories

The moving weighted average method is adopted for valuation of the Company’s inventories during delivery.

(3) Inventory system for inventories

The company’s inventory adopts the perceptual inventory system and is checked at least once a year. Inventory overage and shortage are counted in the annual profit and loss statement of the corresponding year.

(4) Withdrawal method for inventory falling price reserves

The cost or the NRV, whichever is lower, is calculated on the balance sheet date. When the inventory cost is higher than its NRV, inventory falling price reserves shall be withdrawn, and shall be included in the current profits and losses.

The NRV of the inventory is calculated based on reliable evidences acquired, considering factors including the purposes of holding the inventory and the influences of events after the balance sheet date.

• ① In the regular production and operation process, the calculation of the NRV of inventory for direct sales, including finished products, merchandises and materials for sales purposes, is based on the estimated price of the inventory subtracting the estimated sales cost and

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related taxes. The calculation of the NRV of inventory held for the purposes of executing sales contract or employment contract is based on the contract price. If the inventory exceeds the amount ordered by the sales contract, the NRV of the excess part is estimated based on the sales price. The NRV of materials for sales purposes is calculated based on the market price.

• ② In the regular production and operation process, the NRV of the inventory of materials requiring processing is calculated based on the estimated price of the finished product subtracting the cost produced until the completion of processing, the estimated sales cost and related taxes. If the NRV of the finished product is higher than the cost, the material is calculated by the cost. A fall in the price means that the NRV of the finished product is lower than the cost and that the material shall be calculated by the NRV. Inventory falling price reserves shall be withdrawing according to the difference in the values.

• ③ Inventory falling price reserves shall be withdrawn according to the individual inventory item, on a regular basis. In case of low-value inventory in large amounts, the withdrawing shall be conducted according to the inventory category.

• ④ On the balance sheet date, if the previous influencing factors of the write-down of inventory have been eliminated, the amount of write-down shall be recovered and be returned from the inventory falling price reserves previously withdrawn. The returned amount shall be included in the current profits and losses.

• (5) Amortization methods for circulation materials

• ① Amortization method for low-value consumables: one-off write-off method upon receipt.

• ② Amortization method for packaging materials: one-off write-off method upon receipt.

12. Long-term equity investment

The company’s long-term equity investments include the equity investments for exerting control or significant influences on investees and the equity investments for joint ventures. Investees on which the Company is able to exert significant influence are considered as joint ventures of the Company.

• (1) Basis for determining whether the Company has significant influence on and joint control of the investees

Joint control means the control of a specific arrangement, whose activities have to be decided with the joint consent by all participants sharing control rights, according to related agreements. In determining whether joint control exists, in the first place it should be judged whether all participants, or groups of participants, jointly control a specific arrangement. If so, it can be determined that all participants, or groups of participants, do jointly control this arrangement. Secondly, it should be

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judged whether the decisions of the activities in the arrangement are jointly made by the participants controlling the arrangement. If two or more groups of participants collectively control a specific arrangement, joint control does not exist. In judging whether joint control exists, the protective rights shall not be considered.

Significant influence refers to the right of participation in the decisions of financial and operational policies of the investee, not including the right to control, or jointly control with other participants, such decisions. In determining whether significant influence can be exerted on the investee, the voting stocks of the investee held directly or indirectly by the investor and the influences of current executable potential voting rights held by the investor or other parties after the voting rights are converted to the equity of the investee, including the influences of the current convertible warrant issued by the investee, the stock option and the convertible corporate bonds, shall be considered.

If the Company directly holds, or indirectly holds through its subsidiaries, more than 20% (including 20%) but less than 50% of the investee’s voting stocks, it can be generally considered that the Company has significant influence on the investee unless there is clear evidence showing that, under certain circumstances, participation in the investee’s production and operation decisions is not possible.

• (2) Determining the initial investment cost

• ① For long-term equity investment by means of the merger of companies, the investment cost is determined according to the following rules:

  • A. For the merger of companies controlled by the same party, if the acquirer pays cash, transfers non-cash assets or assumes liabilities as the merger consideration, the share of the book value of the owner’s equity of the acquiree in the final controlling party’s financial statement of the merger is deemed as the initial investment cost of the long-term equity investment on the merger date. The capital reserve is adjusted according to the difference between the initial investment cost of long-term equity investment and the book values of cash paid, non-cash assets transferred and liabilities assumed. If the capital reserve is inadequate for the write-down, the retained income shall be adjusted;

  • B. For the merger of companies controlled by the same party, if the acquirer issues equity securities as the merger consideration, the share of the book value of the owner’s equity of the acquiree in the final controlling party’s financial statement of the merger is deemed as the initial investment cost of the long-term equity investment on the merger date. The total face value of the stocks issued is deemed as the capital stock. The capital reserve is adjusted according to the difference between the initial investment cost of long-term equity investment and the total face value of the stocks issued. If the capital reserve is inadequate for the write-down, the retained income shall be adjusted;

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APPENDIX II

• C. For the merger of companies controlled by different parties, the fair value of assets paid, liabilities produced/assumed and equity securities issued on the purpose of obtaining control of the acquiree is deemed as the merger cost and as the initial investment cost of the long-term equity investment on the date of acquisition. The amount paid by the acquirer as the agency fees, including audit fees, legal service fees and evaluation/consultation fees, along with other administrative fees, shall be included in the current profits and losses at the time of occurrence.

• ② For long-term equity investments obtained by methods other than company mergers, the investment cost is determined according to the following rules:

• A. For long-term equity investment obtained by cash payment, the investment cost is the amount actually paid for the purchase. The initial investment cost includes fees, taxes and other necessary expenses, which are directly related to the long-term equity investment;

• B. For long-term equity investment obtained by issuing equity securities, the initial investment cost is the fair value of the equity securities issued;

• C. For long-term equity investment obtained by non-monetary asset exchange, the initial investment cost is the sum of the fair values and related taxes on condition that the exchange has commercial natures and that the fair values of exchanged assets can be reliably measured. The difference between the fair values and the book values of exchanged assets shall be included in the current profits and losses. If either of the two conditions cannot be satisfied, the initial investment cost is the sum of the book values of exchanged assets and related taxes.

• D. For long-term equity investment obtained by debt restructuring, the initial investment cost is the fair value of the stock rights obtained. The difference between the initial investment cost and the book value of creditor’s rights shall be included in the current profits and losses.

(3) Methods for follow-up measurement and profit and loss confirmation

The accounting of long-term equity investments on investees which the Company controls adopts the cost method; the accounting of long-term equity investments on joint ventures and jointly owned ventures adopts the equity method.

• ① The cost method

For long-term equity investments accounted by the cost method, the long-term equity investment cost shall be adjusted if additional investment or disinvestment is made; the cash dividends or profits that the investee declares to distribute shall be confirmed as the current investment income.

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• ② The equity method

Long-term equity investments accounted by the equity method are treated according to the following rules in a general accounting practice:

If the Company’s investment cost of long-term equity investment is greater than the investee’s share of the fair value of net identifiable assets that should be entitled in the investment, the initial investment cost of long-term equity investment shall not be adjusted; on the contrary, if the Company’s investment cost of long-term equity investment is smaller than the investee’s share of the fair value of net identifiable assets that should be entitled in the investment, the difference in the values shall be included in the current profits and losses, and the cost of the long-term equity investment shall be adjusted.

The Company confirms the investment income and other comprehensive income respectively according to the share of the investee’s realized net profits/losses and other comprehensive income that should be entitled or shared. Meanwhile the book value of long-term equity investment shall be adjusted; The Company shall reduce the book value of long-term equity investment according to the entitled proportion calculated by the profits or cash dividends that the investee declares to distribute; The investee’s other owner’s equity changes than the net profits/losses, comprehensive income and profit distribution shall be used to adjust the book value of long-term equity investment and shall be included in the owner’s equity. The confirmation of the share of the investee’s net profits/losses shall be conducted after adjusting the investee’s net profits based on the fair value of the investee’s net identifiable assets at the time of investment. If the accounting policy and the accounting period of the investee differ from those of the Company, the investee’s financial statement shall be adjusted, and the investment income and other comprehensive income shall be confirmed, according to the Company’s accounting policy and accounting period. The Company’s entitled part of unrealized profits and losses from internal transaction between the Company and joint ventures or jointly owned ventures shall be offset according to the Company’s entitled proportion. On such basis the investment profits/losses are confirmed. Unrealized losses from internal transaction between the Company and the investees, if it is asset impairment loss, shall be confirmed in full amount.

If significant influence or joint control, but not control, of the investee is obtained by additional investments or other means, the initial investment cost, switched to the equity method, shall be calculated as the sum of the fair value of the original equity investment and the additional investment cost. If the original equity investment is categorized as sellable financial assets, the difference between the fair value and the book value, along with the change in the accumulated total fair value originally included in other comprehensive income, shall be transferred to the current profit and loss accounted by the equity method which has been switched to.

If significant influence or joint control is lost due to reasons including the disposal of part of the equity investment, the difference between the fair value and the book value of the remaining equity after disposal on the date of loss shall be included in the current profit and

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loss. For other comprehensive income of the original equity investment confirmed by the equity method, at the time that the equity method stops being employed, the accounting treatment shall be conducted on the same basis on which the investee directly disposes related assets or liabilities.

13. Fixed assets

Fixed assets refer to tangible assets whose service life is more than one year, whose unit price is high, and which is held on the purpose of merchandise production, labor service and rental, and operation management.

(1) Confirmation conditions

Fixed assets are confirmed according to the actual cost upon acquisition, if the all of the following conditions are satisfied:

• ① It is very likely that the economic benefits related to this fixed asset will go into the Company.

• ② The cost of the fixed asset can be reliably measured.

Follow-up expenses that belong to a fixed asset shall be included in the cost of the fixed asset, if the conditions for the confirmation of the fixed asset are satisfied; otherwise these expenses shall be included in the current profit and loss at the time of the occurrence of the expenses.

(2) Depreciation method for fixed assets

The Company adopts the straight-line method for the depreciation withdrawal, starting from the next month of the date when the fixed asset reaches an predetermined serviceable condition. According to the category of the fixed asset, the estimated economic service life and the estimated net salvage value, the depreciation life and the annual depreciation rate are determined as following:

				Annual
		Depreciation	Salvage	depreciation
		life	value	rate
Type	Depreciation method	(year)	(%)	(%)
Houses and buildings	Straight-line method	20 years	5.00	4.75
Transportation equipment	Straight-line method	5years	5.00	19.00
Electronic equipment and	Straight-line method	5years	5.00	19.00
other equipment
Office Furniture	Straight-line method	5years	5.00	19.00

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APPENDIX II

For fixed assets whose provision for impairment has already been withdrawn, the withdrawn provision for impairment of the fixed asset shall be excluded in the withdrawal of depreciation.

At the end of each year, the company shall review the fixed assets’ service life, estimated net salvage value and the depreciation method. If the predicted service life is different from the originally estimated value, the fixed asset’s service life shall be adjusted.

• (3) Basis of recognition, valuation method and depreciation method for fixed assets under finance lease

If a leased fixed asset has essentially transferred all asset-related risks and remunerations, the Company confirms that the lease of this fixed asset is finance lease. The cost of fixed assets obtained by finance lease is determined by the fair value of the leased asset on the leasing date or the present value of the minimum lease payment, whichever is lower. Fixed assets obtained by finance lease adopt the same depreciation policy as the Company-owned fixed assets for the withdrawal of depreciation of leased assets. If it can be appropriately determined that the ownership of a fixed asset can be obtained at the end of the leasehold, the withdrawal of depreciation shall be conducted within the service life of the leased asset; otherwise the withdrawal of depreciation shall be conducted within the leasehold or the service life of the leased asset, whichever is shorter.

14. Projects in progress

• (1) Projects in progress accounted by the category of project item

• (2) Standards and time point of carrying forward projects in progress as fixed assets

As for engineering projects in progress, all expenses occurred during the construction period before the assets achieve the predetermined serviceable condition shall be recognized as entry value of the fixed assets. Including construction expenses, original prices of machines and equipment, other necessary expenses occurred for the purpose of making the project in progress achieve the predetermined serviceable condition, borrowing costs borrowed specifically for the project before the fixed asset achieves the predetermined serviceable condition, and borrowing costs of occupied general borrowings. The Company transfers projects in progress to fixed assets when the engineering installation or construction is complete and the predetermined serviceable condition is achieved. Fixed assets whose construction is complete and has achieved the predetermined serviceable condition, but whose final settlement of account has not been processed, shall be transferred to fixed assets by the estimated value according to the project budget, construction cost or the actual cost of the project since the date that they achieved the predetermined serviceable condition. In addition, the depreciation of these fixed assets shall be withdrawn according to the Company’s fixed asset depreciation policy. After the final settlement of account is processed, the previously estimated value shall be adjusted according to the actual cost. The previously withdrawn depreciated value shall not be adjusted.

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APPENDIX II

1. Borrowing costs

(1) Confirmation principles of capitalization of borrowing cost and capitalization period

The Company’s borrowing costs for construction and production which can be directly categorized as assets that satisfy capitalization conditions, if meet conditions listed below, shall be capitalized and included in related asset costs:

• ① Asset expenses have already occurred;

• ② Borrowing costs have already occurred;

• ③ Necessary construction or production activities for the purpose of bringing assets to the predetermined serviceable condition have already started;

Other interests on borrowing costs and the difference between the discount or premium and the exchange shall be included in the current profits and losses.

Assets satisfying capitalization conditions, if are interrupted improperly during the construction or production process for more than 3 consecutive months, the capitalization of borrowing costs shall be suspended.

Constructed or produced assets that satisfy capitalization conditions, if reaches the predetermined serviceable or sellable condition, the capitalization of the capitalization of the assets shall be stopped; subsequent borrowing costs shall be confirmed as costs at the time when the costs occur.

(2) Capitalization rate and calculation method for the capitalization amount of borrowing costs

For borrowings specifically for the construction or production of assets that satisfy capitalization conditions, the capitalization amount of the interest cost is determined as the actual interest cost occurred at the time of borrowing subtracting the income from the interest by depositing unused borrowings in bank or the income from temporary investment using the borrowings.

If general borrowings are occupied by the construction or production of assets that satisfy capitalization conditions, the interest amount of general borrowings that shall be capitalized is determined by multiplying the weighted average of the excess portion of the accumulative asset over the specific borrowings and the capitalization rate of general borrowings that are occupied. The capitalization rate shall be determined according to the weighted average interest rate of the general borrowings.

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APPENDIX II

16. Intangible assets

(1) Valuation method for intangible assets

The Company’s intangible assets include movie and television copyrights, system software and non-patent technologies. The initial measurement shall be conducted according to the actual costs.

(2) Service life and amortization of intangible assets

① Service life estimation for intangible assets with limited service life:

Items	Expected service life
Movie and television copyrights	Authorized period or 10 years
System software	Period of benefit by the contract or
	10 years
Non-patent technologies	Period of benefit by the contract or
	10 years

At the end of each year, the Company shall review the service life and amortization method of intangible assets with limited service life. According to the review, the service life and amortization method of intangible assets at the end of this period do not differ from previous estimation.

② Intangible assets with unpredictable service life during which they are able to bring economic benefits to the Company are regarded as intangible assets with undetermined service life. For intangible assets with undetermined service life, the Company shall review their service life at the end of each year. If the service life remains undetermined after the review, an impairment test shall be conducted on the balance sheet date.

③ Amortization of intangible assets

The Company shall determine the service life of intangible assets with limited service life upon acquisition. Systematic and appropriate amortization shall be conducted within their service life using the straight-line method. The amortization amount shall be included in the current profits and losses according to the benefited item. The actual amortization amount is the cost subtracting the estimated salvage value. For intangible assets whose provision for impairment has already been withdrawn, the accumulative amount of provision for impairment of intangible assets shall be also deducted. The salvage value is zero. The following circumstances are excluded: a third party promises to purchase the intangible asset at the end of its service life, or an estimation of salvage value information can be obtained from an active market and the market is very likely to exist at the end of the service life of the intangible asset.

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Intangible assets with undetermined service life shall not be amortized. The service life of intangible assets with undetermined service life shall be reviewed at the end of each year. If there is any evidence showing that the service life of the intangible asset is limited, its service life shall be estimated and it should be systematically and appropriately amortized in its service life.

(3) Detailed standards for dividing research and development stages of internal R&D projects

• ① The Company regards the preparation activities of information and other related aspects for further development activities as the research stage. The expenses of intangible assets during the research stage shall be included in the current profits and losses at the time they occur.

• ② The Company regards subsequent development activities after the research stage is complete as the development stage.

• (4) Detailed conditions for the capitalization of expenses during the development stage

Intangible assets are confirmed when the expenses during the development stage satisfy all of the following conditions:

• ① It is technically feasible to complete the intangible asset so that it can be used or sold;

• ② The intangible asset is intended to be complete and used or sold;

• ③ The intangible asset offers means to bring economic benefit;

• ④ The Company is capable to complete the development of the intangible asset; and is capable to use or sell the intangible asset;

• 5 Expenses that belong to the intangible asset during the development stage can be reliably measured.

17. Impairment of long-term assets

• (1) Impairment test method and accounting treatment method for long-term equity investments

On the balance sheet day, the Company checks long-term equity investments item by item and determines if the investments show any signs of impairment according to changes in aspects including investees’ operation policies, legal environment, market needs, the industry and the profitability, etc. If the recoverable amount of long-term equity investment is lower than the book value, the difference between the recoverable amount and the book value of long-term equity investment shall be treated as the provision for impairment of the long-term equity investment and shall be withdrawn. Once the loss of asset impairment is confirmed, it shall not be reversed in the future accounting periods.

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(2) Impairment test method and accounting treatment method for fixed assets

On the balance sheet day, the company checks all fixed assets and determines whether there are signs of impairment. If the estimated recoverable amount is lower than the book value, the book value shall be written down to the recoverable value. The amount that has been written down shall be confirmed as the loss of asset impairment and shall be included in the current profits and losses. In the meantime, the corresponding provision for impairment of the asset shall be withdrawn. Once the loss of asset impairment is confirmed, it shall not be reversed in the future accounting periods. If the following signs are observed, the provision for impairment shall be withdrawn in full amount by the individual fixed asset item:

• ① The fixed asset is left unused for a long period, is not to be used in the foreseeable future, and has no value of transfer;

• ② The fixed asset is unusable due to reasons like technology advances;

• ③ The fixed asset is available, however it produces nonconforming products in large quantities;

• ④ The fixed asset is damaged that it has no value of use or transfer;

• 5 Other fixed assets that essentially brings no economic benefits to the Company.

(3) Impairment test method and accounting treatment method for projects in progress

On the balance sheet day, the company checks all fixed assets and determines whether there are signs of impairment. If the estimated recoverable amount is lower than the book value, the book value shall be written down to the recoverable value. The amount that has been written down shall be confirmed as the loss of asset impairment and shall be included in the current profits and losses. In the meantime, the corresponding provision for impairment of the asset shall be withdrawn. Once the loss of asset impairment is confirmed, it shall not be reversed in the future accounting periods. If the following signs are observed, the provision for impairment shall be withdrawn in full amount by the individual fixed asset item:

• ① Construction has been suspended for a long time, and is unlikely to resume in the following 3 years;

• ② The project being constructed is outdated in terms of performance or technology, and does not guarantee to bring economic benefits to the Company;

• ③ Other circumstances that prove that the project is subject to impairment.

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APPENDIX II

(4) Impairment test method and accounting treatment method for intangible assets

When the recoverable amount of an intangible asset is lower than the book value, the book value of the asset shall be written down to the recoverable value. The amount that has been written down shall be confirmed as the loss of asset impairment and shall be included in the current profits and losses. In the meantime, the corresponding provision for impairment of the intangible asset shall be withdrawn. Once the loss of asset impairment is confirmed, it shall not be reversed in the future accounting periods. If one or more circumstances of the following exist, impairment test shall be conducted for the corresponding intangible asset:

• ① This intangible asset is replaced by newer technologies, and its profitability for the Company is significantly reduced;

• ② The market price of the intangible asset significantly reduces in the current period, and is unlikely to recover in the rest of its service life;

• ③ Other circumstances that can prove that the book value of the intangible asset exceeds the recoverable amount.

(5) Goodwill impairment test

Goodwill formed by the merger of companies should receive impairment test at the end of each year. When the company conducts impairment test on related asset groups or combination of asset groups which contain goodwill, if the asset groups or combination of asset groups show signs of impairment, the following procedures shall be followed:

In the first place, impairment test on the asset groups or combination of asset groups that do not contain goodwill shall be conducted. The recoverable amount shall be calculated and compared against the book value of the related assets. Corresponding impairment loss shall be confirmed. Then impairment test on the asset groups or combination of asset groups that contain goodwill shall be conducted. The book value of the related asset groups or combination of asset groups (including the book value of the goodwill apportioned) shall be compared against the corresponding recoverable amount. If the recoverable amount of related asset groups or combination of asset groups is lower than the book value, the impairment loss shall be confirmed according to the difference. In the first place, the amount of impairment loss shall be apportioned to the book value of goodwill of the corresponding asset groups or combination of asset groups. Then according to the proportion of the book value of other assets, excluding the goodwill, with respect to the corresponding asset groups or combination of asset groups, the book value of the said assets shall be deducted.

18. Long-term unamortized expenses

Long-term unamortized expenses refer to the Company’s various costs that have occurred and are apportioned by the current and future periods which are longer than (not including) 1 year. Long-term unamortized expenses are amortized on average according to the actual entered expenses during the benefit period of the project.

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APPENDIX II

19. Employee salaries

Employee salaries refer to the remuneration or compensation offered by the Company for the purpose of acquiring the services provided by the employees or terminating employment relationships. Employee salaries include short-term salaries, post-resignation welfare, dismissal welfare and other long-term employee welfare. Welfare provided by the Company for employees’ spouses, children and dependents, family members of deceased employees and other beneficiaries is also part of employee salaries.

• (1) Confirmation and measurement of short-term salaries

• ① Basic employee salaries (wages, bonuses, allowances and subsidies)

In the accounting period when the employees provide services to the Company, the short-term salaries that have actually occurred shall be confirmed as liabilities, and shall be included in the current profits and losses or related asset costs according to accounting principles.

• ② Employee welfare expenses

Employee welfare expenses occurred in the Company shall be included in the current profits and losses or related asset costs according to the actual amount occurred. If the employee welfare expense is non-monetary welfare, it shall be measured according to its fair value.

• ③ Social insurance expenses, including health insurance expenses, work-related injury insurance expenses and maternity insurance expenses, the housing fund, labor union expenditures, and employee education expenditures

The Company pays for the employees’ social insurance expenses, including health insurance expenses, work-related injury insurance expenses and maternity insurance expenses, the housing fund, and labor union expenditures and employee education expenditures which are withdrawn according to regulations. In the accounting period when an employee provides a service to the Company, the amount of the salary shall be determined according to the withdrawal basis and the withdrawal proportion, and the corresponding liability shall be confirmed and included in the current profits and losses or related asset costs.

• ④ Short-term paid leave

When employees provide services to the Company, thus obtaining the right to enjoy short-term paid leave, the Company shall confirm employee salaries relating to accumulative short-term paid leave and conduct measurement according to the increased expected payable amount due to the accumulative unexercised right. In the accounting period when the employee exercises the right of short-term paid leave, the Company shall confirm employee salaries relating to noncumulative paid leave.

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APPENDIX II

• 5 Short-term profit sharing plan

If the profit sharing plan meets all of the following conditions, the Company shall confirm related payable employment salaries:

  - A. The Company currently undertakes legal obligations or constructive obligations for the payment of employee salaries due to past events;

  - B. The amount of the obligations for the payment of employee salaries produced by the profit sharing plan can be reliably estimated

• (2) Confirmation and measurement of post-resignation welfare

• ① Establishment of withdrawal plan

In the accounting period when the employees provide services to the Company, the Company shall confirm the payable deposit amount calculated by the established withdrawal plan as liability, and shall include it in the current profits and losses or related asset costs.

According to the established withdrawal plan, if it is estimated that the payable deposit amount may not be paid in full within 12 months after the annual report period corresponding to the related services provided by employees, the Company shall measure the payable employee salaries by the discounted amount of the full payable deposit amount according to the corresponding current discount rate (determined, on the balance sheet date, by the market return of national bonds, or high-quality corporation bonds in the active market, matching the period and currency of the established benefit plan).

② Defined benefit plan

• A. Determining the present value of the obligation of the defined benefit plan and the service cost of the current period

According to the projected unit credit method, variables including demographic variables and financial variables shall be estimated based on unbiased and consistent actuarial assumptions. Obligations generated by the defined benefit plan shall be measured and the period to which the obligations belong shall be determined. The Company shall discount the obligations generated by the defined benefit plan according to the corresponding discount rate (determined, on the balance sheet date, by the market return of national bonds, or high-quality corporation bonds in the active market, matching the period and currency of the defined benefit plan) for the purpose of determining the present value of the obligation of the defined benefit plan and the service cost of the current period.

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• B. Confirm the net liability or net asset of defined benefit plan

If the defined benefit plan includes assets, the Company shall confirm the deficit or surplus, formed by the present value of the obligations of the defined benefit plan subtracting the fair value of the assets of the defined benefit plan, as the net liability or net asset of the defined benefit plan.

If the defined benefit plan has surplus, the Company shall measure the net asset of the defined benefit plan according to the surplus or the upper limit of asset of the defined benefit plan, whichever is lower.

• C. Confirmation of the amount that shall be included in the asset costs or the current profits and losses

Service costs, including the service costs of the current and past periods, and the clearing gains or losses. Other service costs than the service costs of the current period, required or permitted by accounting principles, that may be included in the asset costs shall be included in the current profits and losses.

Net interest of net liabilities or net assets of defined benefit plans, including interest income of planned assets, the interest cost of the setting benefit plan obligation and the influential interest of asset upper limit, which shall be recorded into the current profits and losses.

• D. Amount ensured to be recorded in other comprehensive income

Transfer of changes in net debt or assets caused by re-measurement or re-definition of benefit plan, including:

• (a) Actuarial gains and losses, or the increases or decreases of the previously measured set benefit plan due to actuarial assumption and experience adjustment;

• (b) Return on planned assets, excluding the amount net interest of net liabilities or net assets or of defined benefit plans.

• (c) Changes of asset upper limit, excluding the amount net interest of net liabilities or net assets or of defined benefit plans.

The changes of above re-measured net liabilities or net assets or of defined benefit plans is directly recorded into other general benefit, but not transferred to gains and losses in the following accounting period, however, the Company is able to transfer the amount confirmed in other general benefit within its interest scope.

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• (3) Recognition and measurement for dismiss welfare

For the demission welfare provided by the Company to employees, the employee remuneration liabilities produced by demission welfare determined by the two following times shall be reckoned in current profits and losses.

• ① When the enterprise cannot unilaterally withdraw the demission welfare stated on labor service relationship termination plan or layoff proposal;

• ② When the enterprise is determining the cost and expense in relation to the restructuring of paying demission welfare;

If the dismiss welfare is failed to be paid within 12 months after the annual reporting period as planned, the amount of dismiss welfare shall be discounted in cash as per relevant discount rate (determined according to the national debt in the currency at the asset liability statement data and within the defined benefit plan obligation term, or the market return rate of debut of high-quality enterprises), and the employee welfare payable should be calculated as per the discounted amount.

(4) Recognition and measurement for other long-term employee’s welfare

• ① Conforming to the conditions of listed withdrawal plan

For other long-term employee welfare conforming to the conditions of listed withdrawal plan provided by the company, the employee welfare should be paid by the discounted amount of all to be deposited.

• ② Conforming to the conditions of defined benefit plans

In the reporting period, the Company defines the employee welfare cost of other long-term employee welfare as the following aspects:

• A. Service cost;

• B. Net interest of net liabilities or net assets of other long-term employee welfare;

• C. Re-measurement of changes in net liabilities or assets of other long-term employee welfare.

To simplify corresponding accounting treatment, the total net amount of above project is included into the gains and losses of current period and the relevant asset cost.

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20. Accrued liability

(1) Recognition principles for estimated liabilities

The Company recognizes the obligations pertinent to contingencies as estimated liabilities if the following conditions are satisfied simultaneously:

• ① The obligation is the current obligation assumed by the Company;

• ② It is likely to cause any economic benefit to flow out of the enterprise as a result of performance of the obligation;

• ③ The amount of the obligation can be measured in a reliable way.

(2) Measurement method of estimated liabilities

The estimated liabilities shall be initially measured in accordance with the best estimate of the necessary expenses for the performance of the current obligation and factors pertinent to contingencies such as the risks, uncertainties and the time value of money shall be taken into account as a whole. The Company shall check the book value of estimate liabilities on the date of each balance sheet. If there is any exact evidence indicating that the book value cannot really reflect the current best estimate, the Company shall adjust the book value in accordance with the current best estimate.

21. Share-based payment

(1) Types of share-based payment

The share-based payments shall consist of cash-settled share-based payments and equity-settled share-based payments.

• (2) Measures for the confirmation of the fair value of the equity instruments

• ① For equities distributed to employees, the fair value is measured as per the marketing price of the Company’s shares, and adjusted in accordance with the terms and conditions of the distributed shares at the same time (excluding the vesting conditions apart from the market condition).

• ② For stock options distributed to employees, it is not easy to obtain the marketing price in most conditions. If no trade options with similar terms and conditions exist, the Company estimates the fair value of the distributed options by selecting the applicable option pricing models.

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(3) Basis for determining exercisable equity instruments optimal estimation

On each balance sheet date within vesting period, the Company will make the best estimation according to the latest number of exercisable staff and other following-up information and modify the number of exercisable equity instruments. Influence of the above mentioned estimation will be included in relevant costs or expenses and capital reserves can be adjusted accordingly. On the exercise day, the finally projected quantity of the exercisable equity tools should be consistent with the quantity of the actual exercisable equity tools.

(4) Accounting treatment for implementation of share-based payment plan

• ① As to a cash-settled share-based payment instruments, if the right may be exercised immediately after the grant, the fair value of the liability undertaken by the Company shall, on the date of the grant, be included in the relevant costs or expenses, and the liabilities shall be increased accordingly. On each balance sheet date and each account date prior to the settlement, the fair values of the liabilities shall be re-measured and the changes shall be included in the current profits and losses.

• ② As to a cash-settled share-based payment, if the right may not be exercised until the vesting period comes to an end or until the specified performance conditions are met, on each balance sheet date with in the vesting period, the services obtained in the current period shall, based on the best estimate of the information about the exercisable right, be included in the relevant costs or expenses and the corresponding liabilities at the fair value of the liability undertaken by the Company.

• ③ As to an equity-settled share-based payment in return for services of employees, if the right may be exercised immediately after the grant, the fair value of the equity instruments shall, on the date of the grant, be included in the relevant cost or expense and the capital reserves shall be increased accordingly.

• ④ As to an equity-settled share-based payment in return for employee services, if the right cannot be exercised until the vesting period comes to an end or until the prescribed performance conditions are met, then on each balance sheet date within the vesting period, the services obtained in the current period shall, based on the best estimate of the number of vested equity instruments, be included in the relevant costs or expenses and the capital reserves at the fair value of the equities instruments on the date of the grant.

(5) Accounting treatment for modification of share-based payment plan

When the Company modifies the share-based payment plan, if the fair value of the distributed equity instrument is increased due to the modification, the increment of the obtained services shall be confirmed accordingly; and if the quantity of the distributed equity instrument is increased due to the modification, the increment of obtained services shall be confirmed accordingly. The increment of fair value for equity instrument refers to the difference in fair value of the equity instrument before and after the modification on the modification date. If the terms and conditions of share-based payment

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plan is modified through decreasing the total share-based payment fair value or applying other ways not good for the employees, the accounting treatment shall be still carried out for the obtained service regardless of the occurrence of the modification unless the Company cancels all or part of the distribute equity instruments.

(6) Accounting treatment for modification of share-based payment plan

If the distributed equity instruments are canceled or settled within the waiting period (except that canceled due to failure to meet the vesting conditions), the Company shall:

• ① Regard the canceling or settlement as acceleration of exercisable rights, and immediately confirm the amount supposed to be determined within the residual waiting period.

• ② Regard all funds paid to employees as equity buy-back treatment during cancelling or settlement period, with the paid buy-back amount higher than the fair value of the equity instrument on the buy-back date, which is included into the expenses of current period.

If the Company buys back the equity instrument of feasible rights of its employees to write down the owner’s right of enterprise, the amount of buy-back which is higher than the fair value of the equity instrument on the buy-back date shall be recorded in the gains and losses of current period.

22. Revenue recognition principles and measurement methods

(1) Sales revenue

The Company has transferred the significant risks and rewards of ownership of the goods to the buyer; the Company retains neither continuous management right that usually keeps relation with the ownership nor effective control over the sold goods; the amount of revenue can be measured in a reliable way; relevant economic benefits may flow into the Company; when relevant cost incurred or to be incurred can be reliably measured, recognize the sales revenue.

(2) Revenue from providing labor services

If the outcome of transaction concerning providing labor services can be reliably estimated on the balance sheet date, the revenue from rendering labor services shall be recognized by using the percentage-of-completion method. Provide the schedule of labor services, confirmed as per the proportion of the cost incurred to estimated total costs.

The service transaction results can be reliably estimated when meeting the conditions: A. Reliable measuring of income amount; B. Possible inflow of relevant economic interest; C. Reliable determination of transaction completion progress; D. Reliable measuring of incurred cost and to be incurred cost during transaction at same time.

The Company ascertains the total revenue from the providing of labor services in accordance with the received or to-be-received price as stipulated in the contract or agreement, unless the received or to-be-received price as stipulated in the contract or agreement is unfair. The Company shall, on the

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date of the balance sheet, ascertain the current revenue from providing labor services in accordance with the amount of multiplying the total amount of revenues from providing labor services by the schedule of completion then deducting the accumulative revenues from the providing of labor services that have been recognized in the previous accounting periods. At the same time, the enterprise shall carry forward the current cost of labor services in accordance with the sum of multiplying the total amount of revenues arising from the providing of labor services by the schedule of completion and then deducting the accumulative revenues from the providing of labor services.

If the cost of labor services incurred is expected to be compensated, the following conditions shall be considered respectively: the revenue from the providing of labor services shall be recognized in accordance with the amount of the cost of labor services incurred, and the cost of labor services shall be carried forward at the same amount.

If the cost of labor services incurred is not expected to compensate, the cost incurred shall be included in the current profits and losses, and no revenue from the rendering of service shall be recognized.

(3) Revenue from transfer of asset use right

When the amount can be reliably measured, it is likely that economic benefits relating to trades will flow into the company, the amount of revenue resulting from alienating asset-use right shall be determined respectively in the following situations:

• ① The amount of interest income shall be measured and recognized in accordance with the length of time for which the Company’s monetary capital is used by others and the actual interest rate.

• ② The amount of royalty income should be measured and recognized in accordance with the period and method of charging as stipulated in relevant contract or agreement.

(4) Recognition principle for specific income of the Company

• ① Advertising business

Basis for confirmation: the income is determined as per the promissory advertising amount and releasing schedule in the sales agreement signed with the advertising agencies or advertisement clients.

• ② Terminal business

Basis for confirmation: sales income of current month is determined based on actually sold player and television as well as the sales order of the current month;

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• ③ Membership and distribution businesses

• A. Income of Internet paid services

Basis for confirmation: sales income of current month is determined based on actual service prices of the current month.

• B. Distribution income of Internet video copyright

Basis for confirmation: the income is determined according to the obtained licensing fees or the acquire right for getting the licensing fees after distributing the licenses as per the commitments in copyright distribution contract.

• C. Films and TV plays release income

• (a) Broadcasting right transfer for the first time

Basis for confirmation: the first round of transfer is determined only after the production of TV plays is completed and TV Play Release License is issued after being approved by the administrative department in charge of films and TV plays, the copy, videotape and other carriers are transferred to the purchaser for the first time, and the relevant economic benefit is likely to be brought.

• (b) Multiplied transfer of broadcasting right

Basis for confirmation: it is determined at one time once the broadcasting right is written into the contract.

• (c) Other ways

Basis for confirmation: TV plays are fully or partially sold before production or the premiere right is promised to be given; advanced payment is applied for pre-sell of release right or other rights; and the sales income is confirmed only after the production is finished and the TV play is provided to the customer who paid the advanced payment as promised in the contract.

• ④ Other business services

Basis for confirmation: it shall be confirmed when the relevant conditions are satisfied.

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1. Government subsidies

2. (1) Basis and accounting arrangement method for determining asset-related government subsidies

The asset-related government subsidies refer to the government assets which are obtained by enterprises for the purposes of purchase or construction, or which form the long-term assets by other ways.

The government grants related to assets shall be recognized as deferred incomes and be distributed within the useful lives of the relevant assets and shall be recorded in the profits and losses of the current period. But the government subsidies measured at their nominal amounts shall be directly included in the current profits and losses.

(2) Basis and accounting arrangement method for determining asset-related government subsidies

Basis for confirmation of government subsidies related to gains: the Company determines the awards, lump-sum subsidies, financial discount, disbursed R&D budgets (excluding purchasing of fixed assets) and other government subsidies not related to the assets as the government subsidies related to the gains.

The government subsidies pertinent to incomes shall be treated respectively in accordance with the circumstances as follows:

• ① Those subsidies used for compensating the related future expenses or losses of the Company shall be recognized as deferred income and shall include in the current profits and losses during the period when the relevant expenses are recognized; or

• ② Those subsidies used for compensating the related expenses or losses incurred to the Company shall be included in the current profits and losses.

24. Deferred income tax assets and deferred income tax liabilities

In accordance with the temporary difference between the book value and tax base of assets and liabilities on the balance sheet date, the Company determines and measures the impact of taxable temporary difference or deductible temporary difference on the amount of income tax as the deferred income tax liability or deferred income tax asset by using the balance sheet liability method. The Company conducts discounting of any deferred income tax asset or deferred income tax liability.

(1) Recognition of deferred tax asset

• ① As for any deductible temporary difference, and deductible loss or tax deduction that can be carried forward to the next year, the corresponding deferred income tax assets shall be determined to the extent that the amount of future taxable income to be offset by the deductible temporary difference, and deductible loss or tax deduction to be likely obtained.

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However, the deferred income tax assets, which are arising from the initial recognition of assets or liabilities during a transaction which is simultaneously featured by the following, shall not be recognized:

• A. The transaction is not a business combination;

• B. At the time of transaction, the accounting profits will not be affected, nor will the taxable amount(or the deductible loss) be affected.

• ② If the deductible temporary difference related to the investments of the subsidiary companies, joint ventures and jointly owned ventures can meet the following requirements simultaneously, the Company shall confirm the corresponding deferred income tax assets:

• A. The temporary differences likely to be reversed in the expected future;

• B. It is likely to obtain taxable income that may be used for offsetting the deductible temporary difference;

• C. For deductible loss and tax credits that can be carried forward to the subsequent years, the Company may recognize the deferred income tax assets only for deductible losses and tax credits to the extent that it is likely that the taxable income will be available in the future against which the deductible losses and tax credits can be deducted.

• ③ The carrying amount of deferred income tax assets shall be reexamined by the Company on balance sheet day. If it is unlikely to obtain sufficient taxable income taxes to offset the benefit of the deferred income tax assets, the book value of the deferred income tax assets shall be written down. When adequate taxable income is likely to obtain, the deducted amount shall be recovered.

(2) Recognition of deferred income tax liabilities

The impact of all taxable temporary difference on income tax of the Company should be measured as per the income tax rate in the estimated switch-back period, and this impact is determined as the deferred income tax liability, except for the following conditions:

• ① The impact of taxable temporary difference produced in the following transactions and items on income tax are not determined as the deferred income tax;

• A. Initial recognition of business reputation; and

• B. Initial confirmation of assets or liabilities generated in transactions with the following characteristics: the transaction is not enterprise merger, without impact on accounting benefit or taxable income amount or deductible loss due to the occurrence.

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• ② The income tax impact amount of taxable temporary difference related to the investments of the subsidiary companies, joint ventures and jointly owned ventures is generally determined as deferred income tax liability, excluding the ones which satisfy the following two conditions at the same time:

  • A. The Company can control the time of the reverse of temporary differences; and

  • B. The temporary differences are likely not to be reversed in the foreseeable future.

• (3) Recognition of deferred income tax liabilities or assets related to special transactions and items

• ① Deferred income tax assets or liabilities related to enterprise merger

For the taxable temporary difference or deductible temporary difference generated by enterprise merger not under the same control, the relevant deferred income tax fees (or gains) are generally used to adjust the goodwill to be determined for enterprise merger while the deferred income tax liabilities or assets are confirmed.

• ② Items directly included into Owner’s equity

The income taxes of the current period and deferred income tax related to the transactions or events directly recorded in the owner’s rights and interests shall be included in the owner’s rights and interests. The impact of temporary difference on income tax is included in the transactions and times of the Owner’s equity, including: other comprehensive income formed by change of fair value of financial assets available for sale, accounting policy changes where retrospective adjustment method or difference retrospective restatement for corrections of previous (important) errors to be used for adjusting beginning retained earnings, as well as mixed financial instruments with liability or equity to be included into the Owner’s right for initial confirmation.

• ③ Deductible loss and tax deduction

• A. The Company may have deductible loss and tax deduction during the operation process.

Deductible loss refers to the loss allowable be covered by the taxable income in subsequent years as determined in the calculation based on the tax laws. The recoverable losses (deductible loss) and tax deduction, which can be carried-over in the future in accordance with tax law, are regarded as deductible temporary difference. If it is possible to obtain enough taxable income with in the period when the deductible loss and tax deduction are available, the relevant deferred income tax assets are determined and the income tax in profit statement of current period is reduced as limited by the possibly obtained taxable income tax amount.

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• B. Deductible unrecoverable loss of merged enterprise formed by enterprise merger

During enterprise merger, the Company shall not determine the obtained deductible temporary difference of the acquiree which cannot conform to the determination conditions of deferred income tax asset on the purchasing date. Within 12 months after purchasing, if there is new or profound information indicating that the conditions are existing on the purchasing date, and the economic benefit brought by the deductible temporary difference from the buyer predicted on the purchasing date is to be realized, the relevant deferred income tax asset shall be determined and the goodwill shall be reduced. If the goodwill is not enough for deduction, the difference is determined as gains and losses of current period. In addition to the above conditions, the deferred income tax asset related to enterprise merger shall be determined and included into the gains and losses of current period.

• ④ Temporary difference due to deduction of Combination

When the Company is preparing the combined financial statement, if the fair value of the assets and liabilities in the consolidated balance sheet temporarily differ from the tax basis of the subject of tax payment it belongs because of the neutralization of the unrealized internal transaction gains and losses, the deferred tax assets or deferred tax liabilities in the consolidated balance sheet should be confirmed and the income tax expenses in the consolidated profit statement should be adjusted, except the transactions or matters that are directly included into the owners’ equity and the deferred income taxes related to business combination.

• 5 The equity-settled share-based payments

If it is allowed for pre-tax deduction of share-based payment as per the regulations of tax law, the Company calculates and determines the tax base and the relevant temporary different based on the pre-tax deduction amount estimated as per information obtained at the end of each accounting period within the period where the cost is confirmed as per the accounting principles, and the relevant deferred income tax is determined accordingly if the determination conditions are satisfied. If the estimated pre-tax deduction amount in further exceeds the share-based cost determined as per accounting principles, the impact of excess portion on income tax will be directly included into the Owner’s equity.

25. Operating lease and financial lease

If the leasing terms substantially transfer all risks and payments related to the leased asset ownership to the lessee, such lease is financial lease, and the others are operating lease.

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• (1) Operating lease

• ① If serving as the lessee for leasing business, the Company includes the rents in the gains and losses of current period in each period of the lease term by using the straight-line method or as per the use amount of the leasing assets. When the rent-free period is provided by the leaser, the Company shall distribute the total rents within the whole lease term without deduction of the rent-free period by using straight-line method or other proper methods, so as to determine the rents and relevant liabilities in the rent-free period. If the leaser undertakes some expenses of the lessee, the Company distributes the retaining rents in the whole lease term where the relevant expense is deduced from the total rents.

The initial expenses are directly included in gains and losses of current period. The contingent rents shall be recorded into profits and losses of current period in which promised in agreement or actually arisen.

• ② If serving as the lesser for leasing business, the Company regards the received rents as gains within the lease term by using straight-line method. When the rent-free period is provided by the leaser, the leaser shall distribute the total rents within the whole lease term without deduction of the rent-free period by using straight-line method or other proper methods, and also determine the rents in the rent-free period. If the leaser undertakes some expenses of the lessee, the Company distributes the retaining rents income in the whole lease term where the relevant expense is deduced from the total rents income.

The initial expenses are directly included in gains and losses of current period. The large amount shall be capitalized, and shall include in the gains and losses of current period in different phases of the whole lease term with the same foundation for determining the rents income. The contingent rents shall be recorded into gains of current period in which promised in agreement or actually arisen.

(2) Financial lease

• ① If the company is the lessee of leasing, on the lease beginning date of a finance lease, the company shall record the lower one of the fair value of the leased asset and the present value of the minimum lease payments on the lease beginning date as the entering value in an account, recognize the amount of the minimum lease payments as the entering value in an account of long-term account payable, and treat the balance between the recorded amount of the leased asset and the long-term account payable as unrecognized financing charges. The effective interest method shall be used for amortization in each period of the lease term, the financial charges of the current period shall be recognized and included into financial expenses.

The initial expenses are directly included in the asset value.

For withdrawal and financing of depreciated leasing asset, the Company applies the depreciation policy in line with the self-owned asset to be depreciated, and the depreciation period is determined as per the leasing contract. If it can be appropriately determined that

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the ownership of a leased asset can be obtained by the Company at the end of the lease term, the life of leased asset at the beginning date of lease term is set as the depreciation period; otherwise the lease term or the service life of the leased asset shall be regarded as the depreciation period, whichever is shorter.

• ② If serving as the leaser of financial leasing business, on the beginning date of the lease term, the Company shall recognize the sum of the minimum lease receipts on the lease beginning date and the initial direct costs as the entering value in an account of the financing lease values receivable, record in the long-term receivables in the balance sheet and in the unguaranteed residual value at the same time. The balance between the sums of the minimum lease receipts, the initial direct costs and the unguaranteed residual value, and the sum of their present values shall be recognized as realized financing income. The effective interest method shall be used to recognize the leasing income in each phase of the lease term, and included in other business income.

26. Changes in significant accounting policies and accounting estimate

(1) Changes of significant accounting policies

On January ~ July of 2014, the Ministry of Finance successively released eight accounting standards, i.e. Accounting Standards for Enterprises No. 2 - Long-term Equity Investments (Amendment), Accounting Standards for Enterprises No.9 - Employee Salaries (Amendment), Accounting Standards for Enterprises No.30 - Presentation of Financial Statement (Amendment), Accounting Standards for Enterprises No.33 - Consolidated Financial Statement (Amendment), Accounting Standards for Enterprises No.37 - Presentation of Financial Instruments (Amendment), Accounting Standards for Enterprises No.39 - Measurement at Fair Value , Accounting Standards for Enterprises No.40 - Joint Arrangement , and Accounting Standards for Enterprises No.41 - Disclosure of the Rights and Interests in Other Subjects . Except that Accounting Standards for Enterprises No.37 - Presentation of Financial Instruments (Amendment) is applied for financial statements in the year 2014 and the future, other above accounting principles are put in force from July 1st, 2014.

The change of accounting polices this time has already been approved by the board of directors of the Company. In accordance with the relevant provision of eight accounting principles like Accounting Standard for Business Enterprises No.30 — Presentation of Financial Statement (Amendment), the Company represented the financial statement of the Company on July 1st, 2014 (the first execution day), and also carried out retrospective adjustment on the comparison data in the financial statement. In general, the following retrospective adjustments are involved for executing the above accounting principles:

In accordance with Accounting Standards for Enterprises No. 2 - Long-term Equity Investments (Amendment), the retrospective adjustment as carried out for the following items:

The Company adjusted the long-term equity investment of CHS Media calculated as per cost method based on the original long-term equity investing principles (equity investments having no joint

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control or significant influences over the invested entity, for which there is no quotation in the active market and whose fair value cannot be measured reliably) to the available-for-sale asset, and also carry out retrospective adjustment for the changes of fair value.

		1 January 2013		**31 **	December 2013	December 2013
				Financial
				assets which is
				measured by
Invested company	Basic transaction information	Shareholder’s equity attributable to the parent company (+/-)	Long term equity investment (+/-)	fair value and the variation of which is recorded into the profits	Financial assets available for sale (+/-)	Shareholder’s equity attributable to the parent company (+/-)
				and losses of
				the current
				period (+/-)
ejiang CHS
Media Co.,
td.			-20,000,000.00		20,000,000.00

Zhejiang CHS Media Co., Ltd.

(2) Changes of significant accounting estimates

No significant changes of Company accounting estimates incurred during the reporting period.

VI. Taxes

1. Main tax categories and tax rates

Tax category	Taxation basis		Tax rate
VAT	Sales income of product, raw materials and taxable		17.00% or
	services		6.00% (note 1)
Business tax	As per taxable items		3.00%
Urban maintenance and	Amount of turnover tax payable		7.00%
construction tax
Education surcharges	Amount of turnover tax payable		3.00%
Local education surcharges	Amount of turnover tax payable		2.00%
Cultural undertaking	Ad placement income on video platform		3.00%
construction fees
Enterprise income tax	Taxable income	15.00%, 16.50%,	25.00% (note 2)

Note 1: the applicable tax rate of sales income of product, raw materials and accessories in taxable income of VAT is 17%, and the applicable tax rate of Ad placement income on video platform, distribution income of copyright of network video, film distribution income and telecommunication business income is 6%.

Note 2: if the Company and subsidiaries have different enterprise income tax rates

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Name of taxpayer

**Name **	of taxpayer	Income tax rate
Leshi	Internet Information & Technology Corp (Beijing)	15.00%
Tibet	Letv Information Technology Co., Ltd.	15.00%
LeTV	Information Technology (Hong Kong) Co., Ltd.	16.50%
Other	taxpayer except for above enterprises	25.00%

2. Tax preference

The Company was certificated as a high-tech enterprise in 2008. In 2014, the Company applied for the review of high-tech enterprise qualification, and obtained the Certificate for New High-Tech Enterprises No. GR201411001113 after being approved jointly by Beijing Municipal Science and Technology Commission, Beijing Finance Department, Beijing Municipal Office of SAT and Beijing Local Taxation Bureau. The valid period of the certificate is 3 years. In accordance with EIT Law and relevant laws, the company enjoys EIT rate of 15% for national high-tech enterprise within the valid period.

Tibet Letv Information Technology Co., Ltd. signed the Settling-in Agreement with Economic Development Bureau of Tibet Lhasa Economic & Technological Development Zone on December 13th, 2013, therefore the Company enjoys the tax preference at 15% for investment promotion of national level Tibet Lhasa Economic & Technological Development Zone.

VII. Annotation for Combing Items in Financial Statement

1. Monetary funds

Items	Closing balance	Opening balance
Cash holdings	1,320,234.22	609,525.87
Deposit in bank:	446,028,361.41	585,108,579.42
Other monetary funds:	52,501,560.66	22,500,000.00
Total	499,850,156.29	608,218,105.29
Including: total amount of deposit abroad	33,548,431.46	640,351.07

• (1) Other monetary funds refer to guarantee deposits and bank acceptance deposits, wherein RMB 48,501,560.66 refers to cash deposit for letter of guarantee and RMB 4,000,000.00 refers to cash deposit for bank acceptance bill. Apart from the above, there are no items with restriction of use and potential recovery risk due to pledge, mortgage or freeze in closing monetary funds;

• (2) The closing monetary funds is decreased by 17.82% compared to the opening funds mainly because the expansion of operating scale and increased capital investment;

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2. Notes receivable

• (1) Categories of notes receivable

Type	Closing balance	Opening balance
Banker’s acceptance bill	10,837,263.64	54,363,352.84
Trade acceptance	500,000.00
Total	11,337,263.64	54,363,352.84

• (2) Undue closing notes receivable before balance sheet date that endorsed or discounted by the Company

Items Banker’s acceptance bill Total 3. Accounts receivable (1) Disclosure of accounts receivable by category Type Book balance Amount Proportion (%) Accounts receivable with individually significant amounts and individual provision for bad debt reserves — — Accounts receivables of bad-debt provision withdrawn through credit risk characteristic combination 1,978,887,441.18 100.00 Combination 1: aging combination 1,978,887,441.18 100.00 Combination 2: other combination Receivables without individually significant amounts but individual provision for bad debt reserves — — Total 1,978,887,441.18 100.00	Closing derecognized amount Closing un-derecognized amount 334,764,181.00 334,764,181.00 Closing balance Bad-debt provision Book value Amount Withdrawing percentage (%) — — — 86,281,098.13 4.36 1,892,606,343.05 86,281,098.13 4.36 1,892,606,343.05 — — — 86,281,098.13 4.36 1,892,606,343.05	Closing derecognized amount Closing un-derecognized amount 334,764,181.00 334,764,181.00 Closing balance Bad-debt provision Book value Amount Withdrawing percentage (%) — — — 86,281,098.13 4.36 1,892,606,343.05 86,281,098.13 4.36 1,892,606,343.05 — — — 86,281,098.13 4.36 1,892,606,343.05
		1,892,606,343.05

— 117 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Cont.

			Opening balance	Opening balance
	Book balance		**Bad-debt **	provision
				Withdrawing
		Proportion		percentage
Type	Amount	(%)	Amount	(%)	Book value
Accounts receivable with
individually significant amounts
and individual provision for bad
debt reserves	—	—	—	—	—
Accounts receivables of bad-debt
provision withdrawn through
credit risk characteristic
combination	987,326,546.02	100.00	37,078,524.96	3.76	950,248,021.06
Combination 1: aging combination	987,326,546.02	100.00	37,078,524.96	3.76	950,248,021.06
Combination 2: other combination	—	—	—	—	—
Receivables without individually
significant amounts but individual
provision for bad debt reserves	—	—	—	—	—
Total	987,326,546.02	100.00	37,078,524.96	3.76	950,248,021.06

• (1) Receivables for withdrawing bad-debt provision by aging analysis method in combination

		Closing balance
			Withdrawing
Aging	Accounts receivable	Bad-debt provision	percentage (%)
Within one year	1,719,146,833.12	51,559,003.65	3.00
1-2 years	207,389,177.76	20,738,917.78	10.00
2-3 years	48,770,153.84	12,192,538.46	25.00
3-4 years	2,718,789.45	1,359,394.73	50.00
4-5 years	862,487.01	431,243.51	50.00
More than 5 years	—	—
Total	1,978,887,441.18	86,281,098.13	4.36

• (2) Provision for withdrawn, returned or transferred bad debt of current term

Withdrawn bad-debt provision of current year is RMB 47,865,195.67; and no returned or transferred bad-debt provision occurs in the current year.

• (3) Receivables of first five companies with the greatest amount of closing amount (categorizing by debtor)

— 118 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Total receivables of first five companies with the greatest amount in the current reporting period (categorizing by debtor) is RMB 459,859,289.35 and 23.24% of total balance, and the total amount of relevant withdrawn bad-debt reserves is RMB 13,933,042.94.

4. Advance payment

(1) Advance payments listed according to aging

Aging Within one year 1-2 years 2-3 years More than 3 years Total	Closing balance Amount Proportion (%) 282,868,786.54 94.70 12,346,139.91 4.13 2,845,996.07 0.95 657,350.00 0.22 298,718,272.52 100.00	Opening balance Amount Proportion (%) 36,357,741.35 78.00 9,567,246.07 20.52 88,350.00 0.19 600,000.00 1.29 46,613,337.42 100.00	Opening balance Amount Proportion (%) 36,357,741.35 78.00 9,567,246.07 20.52 88,350.00 0.19 600,000.00 1.29 46,613,337.42 100.00
			100.00

• (2) The top five companies of closing balance of advance payment

Proportion to closing balance of advance Company name Amount payment (%) Summary of the top five companies of closing balance of advance payment 72,483,158.48 24.26

— 119 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Other receivables

2. (1) Disclosure of other receivables by category

			Closing balance	Closing balance
	Book balance		**Bad-debt **	provision
				Withdrawing
		Proportion		percentage
Type	Amount	(%)	Amount	(%)	Book value
Accounts receivable with
individually significant amounts
and individual provision for bad
debt reserves	—	—	—	—	—
Accounts receivables of bad-debt
provision withdrawn through
credit risk characteristic
combination	77,122,913.09	99.97	1,283,526.40	1.66	75,839,386.69
Combination 1: aging combination	13,975,293.48	18.12	1,283,526.40	9.18	12,691,767.08
Combination 2: other combination	63,147,619.61	81.85	—	—	63,147,619.61
Receivables without individually
significant amounts but individual
provision for bad debt reserves	19,500.00	0.03	19,500.00	100.00	—
Total	77,142,413.09	100.00	1,303,026.40	1.69	75,839,386.69
Cont.
			Opening balance
	Book balance		**Bad-debt **	provision
				Withdrawing
		Proportion		percentage
Type	Amount	(%)	Amount	(%)	Book value
Accounts receivable with
individually significant amounts
and individual provision for bad
debt reserves	—	—	—	—	—
Accounts receivables of bad-debt
provision withdrawn through
credit risk characteristic
combination	34,030,303.17	100.00	881,767.54	2.59	33,148,535.63
Combination 1: aging combination	16,764,019.07	49.26	881,767.54	5.26	15,882,251.53
Combination 2: other combination	17,266,284.10	50.74			17,266,284.10
Receivables without individually
significant amounts but individual
provision for bad debt reserves
Total	34,030,303.17	100.00	881,767.54	2.59	33,148,535.63

— 120 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

• ① Other receivables for withdrawing bad-debt provision by aging analysis method in combination

		Closing balance
			Withdrawing
Aging	Other receivables	Bad-debt provision	percentage (%)
Within one year	4,342,208.74	130,266.26	3.00
1-2 years	8,651,228.93	865,122.89	10.00
2-3 years	811,162.61	202,790.65	25.00
3-4 years	170,693.20	85,346.60	50.00
4-5 years	—	—
More than 5 years	—	—
Total	13,975,293.48	1,283,526.40	9.18

• ② Other receivables for withdrawing bad-debt provision by aging analysis method in combination

Closing balance

		Closing balance
			Withdrawing
Type	Other receivables	Bad-debt provision	percentage (%)
Deposit and loan	32,996,251.81
The third-party payment platform	16,644,080.75
Equity incentive	13,507,287.05
Total	63,147,619.61

(2) Provision for withdrawn, returned or transferred bad debt of current term

Withdrawn bad-debt provision of current year is RMB 419,308.86; and no returned or transferred bad-debt provision occurs in the current year.

(3) Category of other receivables based on the categorizing of funds nature

Nature of funds Accounts receivable and payable Deposit and loan The third-party account Total	Closing book balance Opening book balance 27,502,080.53 14,065,087.89 32,996,251.81 3,201,196.38 16,644,080.75 16,764,018.90 77,142,413.09 34,030,303.17	Closing book balance Opening book balance 27,502,080.53 14,065,087.89 32,996,251.81 3,201,196.38 16,644,080.75 16,764,018.90 77,142,413.09 34,030,303.17
		34,030,303.17

— 121 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

• (4) Other receivables of top five companies with the greatest closing amount based on the debtor’s categorizing:

				Proportion of	Proportion of	Closing
				total closing		balance of
		Closing		balance of other		bad-debt
Company name	Nature of funds	balance	Aging	receivables (%)		provision
The third-party payment	Accounts receivable	16,644,080.75	Within one year		21.58
platform	and payable
Equity incentive	Taxation	13,507,287.05	Within one year		17.51
Zhejiang Palcent Network	Accounts receivable	2,540,677.00	Within one year		3.29
Technology Development	and payable
Co., Ltd.
Liu Kai	Fund of disbursement	1,518,312.22	Within one year		1.97
	required
Song Tao	Fund of disbursement	1,466,445.00	Within one year		1.90
	required
Total		35,676,802.02			46.25

1. Inventories

2. (1) Categories of inventories

Items Merchandise inventory Raw materials Consignment-out Goods in process Total	Book balance 409,404,042.71 128,946,910.23 43,919,487.81 156,106,591.03 738,377,031.78	Closing balance Revaluation reserves Book value 4,850,053.09 404,553,989.62 128,946,910.23 43,919,487.81 156,106,591.03 4,850,053.09 733,526,978.69	Opening balance Book balance Revaluation reserves Book value 91,309,726.56 3,197,169.89 88,112,556.67 9,060,773.55 9,060,773.55 49,452,821.24 49,452,821.24 149,823,321.35 3,197,169.89 146,626,151.46	Opening balance Book balance Revaluation reserves Book value 91,309,726.56 3,197,169.89 88,112,556.67 9,060,773.55 9,060,773.55 49,452,821.24 49,452,821.24 149,823,321.35 3,197,169.89 146,626,151.46
				146,626,151.46

• (2) Inventory falling price reserves

		Increase in		Decrease in	Decrease in
		current period		current period
	Opening			Reversal or		Closing
Items	balance	Withdrawing	Others	write-off	Others	balance
Merchandise inventory	3,197,169.89	4,850,053.09		3,197,169.89		4,850,053.09
Raw materials
Consignment-out
Goods in process
Total	3,197,169.89	4,850,053.09		3,197,169.89		4,850,053.09

— 122 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

7. Other current assets

Items	Closing balance	Opening balance
Bank financial product	50,000,000.00
Funds incurred by co-production of films	23,000,000.00	23,000,000.00
Total	73,000,000.00	23,000,000.00

1. Financial assets available for sale

2. (1) Financial assets available for sale

		Closing balance	Closing balance		Opening balance	Opening balance
		Depreciation			Depreciation
Items	Book balance	reserves	Book value	Book balance	reserves	Book value
Available-for-sale equity
instruments:
Measured by fair value
Measured at cost	20,000,000.00		20,000,000.00	20,000,000.00		20,000,000.00
Total	20,000,000.00		20,000,000.00	20,000,000.00		20,000,000.00

• (2) Closing available-for-sale financial assets measured at cost

Invested company Book balance The beginning of the period Increase in current period Decrease in current period Zhejiang CHS Media Co., Ltd. 20,000,000.00 Total 20,000,000.00	The end of the period 20,000,000.00
	20,000,000.00

Cont.

			**Depreciation **	**Depreciation **	reserves
			Increase		Decrease		Shareholding	Cash bonus
		The beginning	in current	in current		The end of	ratio in the	of current
**Invested **	company	of the period	period		period	the period	investee (%)	period
Zhejiang	CHS Media Co., Ltd.						5.26
Total							5.26

— 123 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

9. Long-term equity investments

Increase and decrease variation of the term

		Increase and decrease variation of the term	Increase and decrease variation of the term
Invested company I. Joint venture Beijing Yilianweida Technology Co., Ltd. Total	Opening balance Additional investment 318,733.87 318,733.87	Negative investment Investment profit and loss recognized with equity method Other equity change Other equity change -238,038.46 -80,695.41 -238,038.46 -80,695.41

Cont.

Invested company Increase and decrease variation of Distribution of cash dividends or profit Withdrawal of impairment provision I. Joint venture Beijing Yilianweida Technology Co., Ltd. Total	the term Others	Closing balance Ending Depreciation reserves Balance of depreciation reserves	Closing balance Ending Depreciation reserves Balance of depreciation reserves

— 124 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

10. Fixed assets

(1) Fixed assets

				Electronic	Financial
			Transportation	equipment and	leasing
Items			equipment	other equipment	equipment	Total
I.	Original book value:
	1.	Opening balance	10,384,851.04	108,287,783.72	179,087,184.61	297,759,819.37
	2.	Increase in current year		250,730,959.29	176,560,544.06	427,291,503.35
		(1) Purchase		250,567,468.04	176,560,544.06	427,128,012.10
		(2) Increase from
		enterprise combination		163,491.25		163,491.25
	3.	Decrease in current year		193,710,111.95	150,096,869.06	343,806,981.01
		(1) Disposition or
		retirement		193,710,111.95	150,096,869.06	343,806,981.01
		(2) Decrease from
		enterprise combination
	4.	Closing balance	10,384,851.04	165,308,631.06	205,550,859.61	381,244,341.71
II.	Accumulated depreciation
	1.	Opening balance	5,569,012.61	66,512,150.14	46,222,379.05	118,303,541.80
	2.	Increase in current year	1,422,292.49	18,325,737.17	57,721,996.76	77,470,026.42
		(1) Withdrawal	1,422,292.49	18,217,155.32	57,721,996.76	77,361,444.57
		(2) Increase from
		enterprise combination		108,581.85		108,581.85
	3.	Decrease in current year		80,527,542.78	77,016,768.83	157,544,311.61
		(1) Disposition or
		retirement		80,527,542.78	77,016,768.83	157,544,311.61
	4.	Closing balance	6,991,305.10	4,310,344.53	26,927,606.98	38,229,256.61
III.	Provision for impairment
	1.	Opening balance
	2.	Increase in current year
		(1) Withdrawal
	3.	Decrease in current year
		(1) Disposition or
		retirement
	4.	Closing balance
IV.	Book value
	1.	Closing book value	3,393,545.94	160,998,286.53	178,623,252.63	343,015,085.10
	2.	Opening book value	4,815,838.43	41,775,633.58	132,864,805.56	179,456,277.57

(2) No temporary idle fixed assets

— 125 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

(3) Fixed assets acquired from financing lease

		Original book	Accumulated	Depreciation
Items		value	depreciation	reserves	Book value
Electronic	equipment	205,550,859.61	26,927,606.98		178,623,252.63
Total		205,550,859.61	26,927,606.98		178,623,252.63

• (4) No fixed assets acquired from operating leasing

• (5) No fixed assets without certificate of title

11. Intangible assets

• (1) Intangible assets

				Movie and
				television	Non-patent
Items			System software	copyrights	Technology	Total
I.	Original book value
	1.	Opening balance	193,331,665.45	3,176,464,551.49	199,459,984.62	3,569,256,201.56
	2.	Increase in current year	80,596,427.11	1,461,932,062.87	91,674,376.16	1,634,202,866.14
		(1) Purchase	4,191,335.81	1,461,932,062.87	7,664,498.74	1,473,787,897.42
		(2) Internal R&D	76,405,091.30		84,009,877.42	160,414,968.72
		(3) Increase from
		enterprise combination
	3.	Decrease in current year		273,453,787.13		273,453,787.13
		(1) Disposal		273,453,787.13		273,453,787.13
	4.	Closing balance	273,928,092.56	4,364,942,827.23	291,134,360.78	4,930,005,280.57
II.	Accumulated amortization
	1.	Opening balance	20,613,888.98	836,678,830.38	65,839,898.97	923,132,618.33
	2.	Increase in current year	24,087,342.22	999,876,496.11	22,691,257.58	1,046,655,095.91
		(1) Withdrawal	19,125,560.94	999,876,496.11	20,622,251.06	1,039,624,308.11
		(2) Internal R&D	4,961,781.28		2,069,006.52	7,030,787.80
	3.	Decrease in current year		383,488,362.69		383,488,362.69
		(1) Disposal		383,488,362.69		383,488,362.69
	4.	Closing balance	44,701,231.20	1,453,066,963.80	88,531,156.55	1,586,299,351.55
III.	Provision for impairment
	1.	Opening balance			4,609,325.83	4,609,325.83
	2.	Increase in current year		554,697.13		554,697.13
		(1) Withdrawal		554,697.13		554,697.13
	3.	Decrease in current year
		(1) Disposal
	4.	Closing balance		554,697.13	4,609,325.83	5,164,022.96
IV.	Book value
	1.	Closing book value	229,226,861.36	2,911,321,166.30	197,993,878.40	3,338,541,906.06
	2.	Opening book value	172,717,776.47	2,339,785,721.11	129,010,759.82	2,641,514,257.40

— 126 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Proportion of intangible assets acquired from internal R&D of the Company in current period to the value of intangible assets is 4.80%.

12. Development expenditure

(1) Changes in development expenditure

			Increase in		Decrease in	Decrease in
			current period		current period
						Transfer into
			Internal		Recognized	losses and
		Opening	development		as intangible	profits in	Closing
Items		balance	expense	Others	assets	current period	balance
Project	1		8,082,527.71		8,082,527.71		—
Project	2		6,827,866.17				6,827,866.17
Project	3		18,217,139.45				18,217,139.45
Project	4		38,686,474.09				38,686,474.09
Project	5		7,885,260.02				7,885,260.02
Project	6		38,056,424.15				38,056,424.15
Project	7	16,731,109.88	18,857,962.33		35,589,072.21		—
Project	8		17,951,325.05				17,951,325.05
Project	9	8,279,341.45	19,367.70		8,298,709.15		—
Project	10	3,675,758.73	9,257,140.18				12,932,898.91
Project	11	3,801,458.08	9,054,397.54		12,855,855.62		—
Project	12		7,743,463.01				7,743,463.01
Project	13		8,181,622.39				8,181,622.39
Project	14		8,363,995.14				8,363,995.14
Project	15		16,887,086.04				16,887,086.04
Project	16	11,388,583.89			11,388,583.89		—
Project	17	—	3,614,896.86				3,614,896.86
Project	18	1,517,960.32	11,583,169.64		13,101,129.96		—
Project	19	624,791.55	17,427,622.52				18,052,414.07
Project	20	702,270.79	29,287,587.70				29,989,858.49
Project	21	—	11,336,834.77		11,336,834.77		—
Project	22	—	10,950,997.68				10,950,997.68
Project	23		5,044,237.75		5,044,237.75		—
Project	24	—	6,973,810.48		6,973,810.48		—
Project	25	—	22,259,960.88				22,259,960.88
Project	26	4,940.27	7,517,544.61		7,522,484.88		—
Project	27	—	10,344,353.37				10,344,353.37
Project	28	—	1,319,409.11				1,319,409.11
Project	29	50,281.14	5,672,773.21				5,723,054.35
Project	30	—	1,368,209.04				1,368,209.04
Project	31	—	1,366,725.62		1,366,725.62		—

— 127 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Project 32 Project 33 Project 34 Project 35 Project 36 Project 37 Project 38 Project 39 Project 40 Project 41 Project 42 Project 43 Project 44 Project 45 Project 46 Project 47 Project 48 Project 49 Project 50 Project 51 Project 52 Project 53 Project 54 Project 55 Project 56 Project 57 Project 58 Project 59 Project 60 Total	Opening balance 432,831.43 429,442.34 — — 10,127,020.63 — 6,434,159.50 — — 190,104.49 — — — — — — — — — — — — — — — — — 1,541,592.40 65,931,646.89	Increase in current period Internal development expense Others 7,815,462.40 8,802,252.26 2,949,729.44 4,843,999.99 28,054,268.37 447,675.78 465.60 440,159.10 253,744.64 712,471.48 583,603.45 96,473.41 70,568.88 435,640.73 308,600.73 29,166.43 19,742.94 195,913.73 21,171.78 45,315.14 23,256.54 70,510.26 110,157.23 400,135.58 81,075.59 2,005,553.29 38,216,978.18 25,365,093.39 482,539,370.55 —	Decrease in current period Recognized as intangible assets Transfer into losses and profits in current period 447,675.78 38,216,978.18 190,342.72 160,414,968.72 —	Closing balance 8,248,293.83 9,231,694.60 2,949,729.44 4,843,999.99 38,181,289.00 — 6,434,625.10 440,159.10 253,744.64 902,575.97 583,603.45 96,473.41 70,568.88 435,640.73 308,600.73 29,166.43 19,742.94 195,913.73 21,171.78 45,315.14 23,256.54 70,510.26 110,157.23 400,135.58 81,075.59 2,005,553.29 — 1,541,592.40 25,174,750.67
				388,056,048.72

(2) Proportion of R&D expenditure to gross expenditure of R&D projects of the Company in current period is 59.90%.

— 128 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (3) Start time and specific basis of capitalization:

Project management for R&D activities of the Company are carried out in 7 stages: pre-research, project approval, demand schedule, design, realization, test and release & project end. “Design” and links previous to design of R&D project are included in research stage, and the R&D expenditure shall be recorded into current profits and losses. After “design” stage, it enters in to “realization” stage, which is regarded as development stage. Once expenditures incurred during the development stage simultaneously meet the following conditions, these expenditures can be capitalized and recognized as intangible assets, or included in current profits and losses:

• A. It is feasible technically to finish the intangible assets for use or sale;

• B. It is intended to finish and use or sell the intangible assets;

• C. The usefulness of methods to create economic benefits by using intangible assets has been proved, including being able to prove that there is a potential market for the products manufactured by applying the intangible assets or for the intangible assets;

• D. There are sufficient technologies, financial resources and other resources for development of intangible assets, and the Company is able to use or sell these intangible assets;

• E. The expenses incurred from developing the intangible asset can be reliably measured.

• Business reputation

• (1) Original book value of business reputation

		Increase in	Decrease in
		current period	current period
Invested Company Name or		For the Merger
Business Reputation Items	Opening balance	of Enterprise	Disposal	Closing balance
Dongyang Flower Film & TV
Co., Ltd.		747,585,265.47		747,585,265.47
Total		747,585,265.47		747,585,265.47

• (2) At the end of the reporting period, the Company conducted impairment test for business reputation in combination with related assets group or assets group combination, Since there is no impairment, the provision for impairment of assets is not withdrawn.

— 129 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

14. Long-term unamortized expenses

Items Expenditure incurred on improvement of leased fixed assets Total	Opening balance	Increase in current period Amortization amount of current period 2,213,917.52 283,234.52 2,213,917.52 283,234.52	Other decreases	Closing balance 1,930,683.00
				1,930,683.00

15. The deferred income tax assets and the deferred income tax liabilities

• (1) Deferred income tax assets not offset

Items Bad-debt provision Inventory falling price reserves Intangible assets - goodwill Impairment Reparable loss Total	Closing balance Deductible temporary differences Deferred income tax assets 87,566,926.40 14,776,335.61 4,850,053.09 1,212,513.27 554,697.13 97,236.66 722,231,799.92 180,132,496.65 815,203,476.54 196,218,582.19	Opening balance Deductible temporary differences Deferred income tax assets 37,954,892.68 5,958,117.11 3,197,169.89 799,292.47 859,365.83 128,904.87 79,482,604.13 19,870,651.03 121,494,032.53 26,756,965.48	Opening balance Deductible temporary differences Deferred income tax assets 37,954,892.68 5,958,117.11 3,197,169.89 799,292.47 859,365.83 128,904.87 79,482,604.13 19,870,651.03 121,494,032.53 26,756,965.48
			26,756,965.48

• (2) Details of unconfirmed deferred income tax assets

Items			Closing balance	Opening balance
Deductible	temporary	differences	17,198.13	5,369.82
Deductible	losses		429,850,427.68	414,620,839.06
Total			429,867,625.81	414,626,208.88

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(3)	Deductible losses of unconfirmed	deferred income tax assets will be expired in the following	deferred income tax assets will be expired in the following	deferred income tax assets will be expired in the following	deferred income tax assets will be expired in the following
	listed year
Year		Closing balance		Opening balance	Remarks
2014				—
2015			428,676.12	428,676.12
2016		397,080,581.78		404,139,083.97
2017			1,394.51	1,394.51
2018		10,051,684.46		10,051,684.46
2019		22,288,090.81
Total		429,850,427.68		414,620,839.06
16.	Other non-current assets
Items				Closing balance	Opening balance
Copyright fees prepaid				230,797,275.71	224,129,581.31
Total				230,797,275.71	224,129,581.31
17.	Short-term loans
(1)	Categories of short-term loans
Items				Closing balance	Opening balance
Pledge loans
Guaranteed loans				1,318,000,000.00	970,000,000.00
Credit loans				70,000,000.00
Pledge loans
Total				1,388,000,000.00	970,000,000.00
(2)	No expired unliquidated short-term loans at the end of current period
18.	Notes payable
Type				Closing balance	Opening balance
Banker’s acceptance bill				20,000,000.00	22,500,000.00
Trade acceptance
Total				20,000,000.00	22,500,000.00

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APPENDIX II

19. Accounts payable

(1) Listed accounts payable

Items Accounts payable Copyright fees prepaid Total	Closing balance Opening balance 842,473,525.36 378,717,744.06 762,816,036.13 403,465,233.54 1,605,289,561.49 782,182,977.60	Closing balance Opening balance 842,473,525.36 378,717,744.06 762,816,036.13 403,465,233.54 1,605,289,561.49 782,182,977.60
		782,182,977.60

• (2) Significant accounts payable with more than one-year aging

		Reason for
		outstanding
		payment or
Items	Closing balance	carry-over
H&R Century Pictures Co., Ltd.	47,100,000.00	No settlement
Le Vision Pictures (Beijing) Co., Ltd.	26,200,000.00	No settlement
Xi’an Aojinbai Film & TV Co., Ltd.	15,050,000.00	No settlement
Beijing Xiyinghantang Media Communication Co., Ltd.	12,000,000.00	No settlement
Mango Media Communication Co. Ltd.	11,400,000.00	No settlement
Croton Media	10,000,000.00	No settlement
Total	121,750,000.00

20. Advance receipts

(1) Listed advance receipts

Items		Closing balance	Opening balance
Advances	on sales	186,817,357.04	39,730,496.55
Copyright	fees prepaid	136,578,250.00	4,597,250.00
Total		323,395,607.04	44,327,746.55

(2) Significant advance receipts with more than one-year aging

							Reason for
							outstanding
							payment or
Items						Closing balance	carry-over
Shanghai	Synacast	Media	Tech	Co.,	Ltd.	3,525,200.00	Not time for
							settlement
Total						3,525,200.00

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APPENDIX II

21. Payroll payable

(1) Listed payroll payable

		Opening	Increase in	Decrease in	Closing
Items		balance	current period	current period	balance
I.	Short-term remuneration	1,997,353.71	479,077,970.00	478,297,407.87	2,777,915.84
II.	Separation welfare- plan	881,399.53	83,260,550.90	83,910,733.75	231,216.68
	of withdrawal and deposit
III.	Demission welfare	69,457.00		69,457.00
IV.	Other benefits due in one
	year
Total		2,948,210.24	562,338,520.90	562,277,598.62	3,009,132.52
(2)	Listed short-term payroll
		Opening	Increase in	Decrease in	Closing
Items		balance	current period	current period	balance
I.	Salaries, bonuses,	997,849.49	372,262,272.90	370,695,246.03	2,564,876.36
	allowances and subsidies
II.	Employee services and
	benefits
III.	Social insurances	471,742.16	37,814,951.15	38,276,038.75	10,654.56
	Including: Medical	424,048.16	34,410,525.47	34,834,573.63	—
	Insurance Premiums
	Work-related injury	22,421.62	1,118,540.15	1,135,322.42	5,639.35
	insurance premiums
	Birth insurance premiums	25,272.38	2,285,885.53	2,306,142.70	5,015.21
IV.	Housing fund	518,467.97	69,000,745.95	69,316,829.00	202,384.92
V.	Labor union expenditure	9,294.09		9,294.09
	and employee education
	expenses
VI.	Short-term absence with
	payroll
VII.Short-term profit sharing
	plan
Total		1,997,353.71	479,077,970.00	478,297,407.87	2,777,915.84

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FINANCIAL INFORMATION OF LESHI INTERNET

(3) Listed withdrawal and deposit plan

	Opening	Increase in **Decrease **	in	Closing
Items	balance	current period current period		balance
1. Basic endowment	776,416.68	79,791,425.08 80,366,980.83		200,860.93
insurance
2. Unemployment insurance	104,982.85	3,469,125.82 3,543,752.92		30,355.75
expense
Corporate annuity payment
Total	881,399.53	83,260,550.90 83,910,733.75		231,216.68
22. Taxes payable
Items		Closing balance	Opening balance
VAT		155,691,573.10		53,711,923.29
Business tax		988,886.39		9,162,675.01
Enterprise income tax		128,337,553.73		73,118,370.54
Urban maintenance and construction tax		3,987,887.68		964,369.66
Education surcharges		718,906.53		583,092.50
Withheld and remitted individual income tax		80,921,820.09		1,521,658.22
Cultural undertaking construction fees		38,497,869.24		16,461,037.39
Others		613,134.46		101,318.08
Total		409,757,631.22		155,624,444.69
23. Interest payable
Items		Closing balance	Opening balance
Corporate bond interest		15,200,173.46		25,835,645.21
Total		15,200,173.46		25,835,645.21
24. Dividends payable
Items		Closing balance	Opening balance
Common stock dividend		11,118,812.41
Total		11,118,812.41

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FINANCIAL INFORMATION OF LESHI INTERNET

25. Other payables

Listed according to nature of funds

Items	Closing balance	Opening balance
Accounts receivable and payable	21,399,563.73	7,966,535.15
Cash deposit and guarantee deposit	5,722,870.27	4,671,585.61
Others	227,236.91	69,070.00
Total	27,349,670.91	12,707,190.76

26. Non-current liabilities maturing within one year

Items	Closing balance	Opening balance
Long-term loans due within one year	16,700,000.00	197,000,000.00
Long-term account payable due within one year	285,000,000.00
long-term account payable due within one year	90,100,262.20	86,165,347.81
Deferred income maturing within one year	9,347,908.80	7,856,581.63
Total	401,148,171.00	291,021,929.44

27. Other current liabilities

Items			Closing balance	Opening balance
Short-term	bonds	payable	199,606,666.61	199,453,333.34
Total			199,606,666.61	199,453,333.34

The increases and reductions of short-term bonds payable:

Bond name Short-term bonds of RMB 200 million of Bank of Nanjing Short-term bonds of RMB 200 million of Ping An Bank Total	Face value Issue date: Bond term 200,000,000.00 2013/9/6 1 year 200,000,000.00 2014/6/27 1 year 400,000,000.00	Issue amount Opening balance 200,000,000.00 199,453,333.34 200,000,000.00 400,000,000.00 199,453,333.34	Issue amount Opening balance 200,000,000.00 199,453,333.34 200,000,000.00 400,000,000.00 199,453,333.34
			199,453,333.34

Cont.

— 135 —

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FINANCIAL INFORMATION OF LESHI INTERNET

Bond name Short-term bonds of RMB 200 million of Bank of Nanjing Short-term bonds of RMB 200 million of Ping An Bank Total	Current issue 200,000,000.00 200,000,000.00	Rates in face value Amortization of discounts and premiums 10,660,000.00 546,666.66 7,116,666.69 406,666.61 17,776,666.69 953,333.27	Current Repayment Closing balance 200,000,000.00 199,606,666.61 200,000,000.00 199,606,666.61	Current Repayment Closing balance 200,000,000.00 199,606,666.61 200,000,000.00 199,606,666.61
				199,606,666.61

28. Long-term loans

(1) Categories of long-term loans

Items Pledge loans Pledge loans Guaranteed loans Total	Closing balance	Opening balance Interest rate range 16,700,000.00 16,700,000.00	Opening balance Interest rate range 16,700,000.00 16,700,000.00

29. Bonds payable

(1) Bonds payable

Items					**Closing **	balance	Opening balance
Bond	12	Le	Vision	01			199,444,558.52
Bond	12	Le	Vision	02			199,165,930.42
Total							398,610,488.94

• (2) The increases and reductions of bonds payable: (not including the Preferred Stocks and Perpetual Capital Securities)

Bond Name Bond 12 Le Vision 01 Bond 12 Le Vision 02 Total	Face value Issue date: Bond term 200,000,000.00 2012/5/8 2+1 years 200,000,000.00 2012/7/13 2+1 years 400,000,000.00	Issue amount Opening balance 200,000,000.00 199,444,558.52 200,000,000.00 199,165,930.42 400,000,000.00 398,610,488.94	Issue amount Opening balance 200,000,000.00 199,444,558.52 200,000,000.00 199,165,930.42 400,000,000.00 398,610,488.94
			398,610,488.94

Cont.

— 136 —

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FINANCIAL INFORMATION OF LESHI INTERNET

Bond Name Current issue Bond 12 Le Vision 01 Bond 12 Le Vision 02 Total	Rates in face value Amortization of discounts and premiums 17,067,592.74 555,441.49 14,216,935.48 834,069.59 31,284,528.22 1,389,511.08	Current repayment Closing balance 45,000,000.00 155,000,000.00 70,000,000.00 130,000,000.00 115,000,000.00 285,000,000.00	Current repayment Closing balance 45,000,000.00 155,000,000.00 70,000,000.00 130,000,000.00 115,000,000.00 285,000,000.00
			285,000,000.00

Note: the above bonds matured in 2015, so the closing balance should be included in non-current liabilities maturing within one year.

30. Long-term payables

Listed long-term accounts payable according to nature of funds

Items	Closing balance	Opening balance
Leaseback and financial leasing of equipment	60,051,607.49
Financial leasing equipment	25,836,034.64	24,223,395.00
Unrecognized finance fees	-4,013,818.45	-5,336,146.08
Total	81,873,823.68	18,887,248.92

31. Deferred income

		Increase in	Decrease in
Items	Opening balance	current period	current period	Closing balance	Forming reason
Unrealized profits and		18,695,817.67	12,463,878.40	6,231,939.27	Unrealized profits
losses in leaseback					and losses in
					leaseback due to
					after-sale financial
					leasing
Total		18,695,817.67	12,463,878.40	6,231,939.27

32. Other non-current liabilities

Items Loans of Jia Yuefang Total	Closing balance Opening balance 1,015,568,661.50 1,015,568,661.50	Closing balance Opening balance 1,015,568,661.50 1,015,568,661.50

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FINANCIAL INFORMATION OF LESHI INTERNET

33. Capital stock

Increase/Decrease (+, -) Transferred Opening Issued new Stock shares of Closing balance shares dividend provident fund Others Subtotal balance Total shares 798,466,298.00 42,723,765.00 42,723,765.00 841,190,063.00

Note: 42,723,765 shares are issued to the public in current period, including purchased 100% equities of Flower Film & TV Co., Ltd. from Cao Yong and Bai Yu, 99.5% equities of Le Vision New Media from LeTV Holdings (Beijing) Co., Ltd. and Jiangsu Hongtu Venture Investment Management Co., Ltd. and raised funds from Beijing Xinfuhengtong Technology Co., Ltd. and Shanghai Dazheng Investment Co., Ltd., totaling 38,699,337 shares. Huapu Tianjian Certified Public Accountants (limited liability partnership) has issued capital verification report (HYZ [2014] No. 1925) for validation. In the second stock option period according to phase, additional 4,024,428 shares are issued, and Huapu Tianjian Certified Public Accountants (limited liability partnership) has issued capital verification report (HYZ [2014] No. 2491) for validation.

34. Capital reserves

Items Opening balance Capital premium (capital stock premium) 131,392,630.56 Other capital reserves 48,241,007.24 Total 179,633,637.80	Increase in current period 1,209,325,374.55 92,336,850.75 1,301,662,225.30	Decrease in current period 111,973,068.12 3,304,267.20 115,277,335.32	Closing balance 1,228,744,936.99 137,273,590.79
			1,366,018,527.78

Increases in current capital reserves are mainly affected by capital stock premium of non-public issued shares and changes of other capital reserves of joint venture. Decreases in current capital reserves are mainly caused due to acquired equities of minority shareholders of subsidiary company.

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FINANCIAL INFORMATION OF LESHI INTERNET

35. Other comprehensive income

Items Opening balance Amount Incurred in Current Period Incurred amount before income tax of current period Less: transferring other comprehensive income recorded in the previous period into the loss of current period Less: income tax expenses After-tax attributable to the parent company After-tax attributable to minority shareholders (I) Other comprehensive incomes not allowed to be re-classified into profit and loss Including: Re-measurement of changes in net liabilities and assets of defined benefit plans Share of other comprehensive income not allowed to be re-classified into profit and loss of the invested company as per equity laws II. Other comprehensive income to be re-classified into profit and loss Where: share of other comprehensive income to be re-classified into profit and loss of the invested company as per equity laws Profit/loss of changes in fair value of financial assets available for sale Profits and losses of sellable financial asset re-classified from the investments which will be held to their maturity Losses and profits of cash flow hedging in force Balance arising from the translation of foreign currency financial statements -1,205,362.95 498,719.46 Total other comprehensive income -1,205,362.95 498,719.46

Closing balance -706,643.49

-706,643.49

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APPENDIX II

1. Surplus reserves

Items Statutory surplus reserves Free surplus reserves Total	Opening balance Increase in current period Decrease in current period 63,605,357.83 53,360,002.39 63,605,357.83 53,360,002.39	Closing balance 116,965,360.22
		116,965,360.22

Increases in current surplus reserves are from the legal surplus reserves withdrawn at 10% of net profits.

37. Undistributed profits

			Amount of
Items	Current amount		previous period
Undistributed profits at the end of last year before
adjustment		559,040,213.83	353,794,761.11
Total opening undistributed profits during adjustment
(increase is indicated by “+”, and decrease is indicated
by “-”)
Undistributed profits at the beginning of the year after
adjustment		559,040,213.83	353,794,761.11
Add: net profit attributable to owner of parent company
in current period		364,029,509.12	255,009,694.82
Less: appropriation of statutory surplus reserves		53,360,002.39	28,864,242.10
Withdrawal of free surplus reserves
Appropriation of general risk reserves
Appropriation of ordinary shares dividend		26,349,369.78	20,900,000.00
Common stock dividends converted to capital stock
Undistributed profits at the end of the year		843,360,350.78	559,040,213.83
38. Operating revenues and operating costs
Amount in current period		**Amount in **	previous period
Items Income	Cost	Income	Cost
Main business income 6,818,938,622.38 5,828,133,468.42		2,361,244,730.86	1,668,684,007.47
Total 6,818,938,622.38 5,828,133,468.42		2,361,244,730.86	1,668,684,007.47

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FINANCIAL INFORMATION OF LESHI INTERNET

39. Business taxes and surcharges

	Amount in	Amount in
Items	Current Period	Previous Period
Business tax	3,039,657.58	2,085,822.43
Urban maintenance and construction tax	3,115,182.21	1,230,115.32
Education surcharges	1,434,631.81	527,195.42
Local educational expenses	1,062,164.15	351,457.82
Cultural undertaking construction fees	47,962,602.59	21,727,382.20
Others	234,632.08
Total	56,848,870.42	25,921,973.19

40. Selling expenses
	Amount in	Amount in
Items	Current Period	Previous Period
Salary and welfare	121,268,879.77	65,840,638.76
Advertising and production expenses	156,529,979.27	79,632,919.26
Consulting service cost	18,495,103.11	7,676,315.25
Travelling expense	9,084,418.27	4,444,336.43
Service fee	3,512,686.58	3,212,774.88
Office and conference expenses	11,402,974.34	2,817,883.06
Depreciation and rental expenses	10,141,820.28	3,426,373.14
Social engagement expenses	5,176,625.74	2,782,599.15
Transportation and vehicle expenses	1,911,032.82	2,252,859.13
Equity incentive expenses	19,840,824.02	7,339,478.98
Logistics and after-sales expenses	131,512,008.98	10,301,645.04
Others	159,112.31	4,792,259.52
Total	489,035,465.49	194,520,082.60

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APPENDIX II

41. Administrative expenses

	Amount in	Amount in
Items	Current Period	Previous Period
Salary and welfare	78,263,936.32	30,978,811.21
Equity incentive expenses	26,681,631.05	14,178,997.31
Depreciation, amortization and rental expenses	33,094,899.09	14,246,257.82
Office and conference expenses	11,683,335.84	10,062,218.54
Consult fee	11,152,380.11	7,028,702.60
Travelling expense	6,704,652.90	1,617,742.80
Tax	1,748,861.57	1,027,505.45
Social engagement expenses	2,969,042.00	1,081,828.95
Correspondence	1,099,043.94	1,628,917.27
Service fee	1,326,642.24	1,020,916.57
Others	730,227.54	7,116,425.77
Total	175,454,652.60	89,988,324.29

42. Financial expense

	Amount in	Amount in
Items	Current Period	Previous Period
Interest expenses	147,661,598.38	114,836,655.17
Less: interest income	3,514,224.90	1,259,079.88
Net interest expense	144,147,373.48	113,577,575.29
Exchange loss	2,078,055.06	10,987.39
Less: exchange gain	812,481.07	1,230,043.23
Net exchange loss	1,265,573.99	-1,219,055.84
Service fees and others	22,502,548.31	3,939,500.43
Including: platform service fees	16,690,259.90	3,176,032.51
Total	167,915,495.78	116,298,019.88
43. Asset impairment loss
	Amount in	Amount in
Items	Current Period	Previous Period
I. Bad-debt losses	48,284,504.53	24,572,369.89
II. Inventory falling price loss	4,850,053.09	3,197,169.89
III. Impairment loss of intangible assets	554,697.13
Total	53,689,254.75	27,769,539.78

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FINANCIAL INFORMATION OF LESHI INTERNET

44. Investment income

Items Long-term equity investment income measured by employing equity method Investment income for disposing long-term equity investment production Financial assets which is measured by fair value and the income from investment, variation of which is recorded into the profits and losses of the current period Financial assets which is measured by fair value and the income from investment, variation of which is recorded into the profits and losses of the current period Income of held-to-maturity investment during holding period Investment income during the period of holding available-for-sale financial assets Investment income resulting from disposal of available-for-sale financial assets Gains of remaining equity re-measured at fair value after control right loss Investment income from bank financial Total	Amount in Current Period -80,695.41 -238,038.46 323,772.31 5,038.44	Amount in Previous Period -90,791.38 -1,264,347.43 -1,355,138.81

45. Non-operating income

(1) Details of non-operating income

			Amount
			Included in the
	Amount in	Amount in	Non-Recurring
Items	Current Period	Previous Period	Profit and Loss
Total disposal gains from non-current assets	—	26,555.72	—
Including: gains on disposal of fixed assets	—	26,555.72	—
Gains on disposal of intangible
assets	—	—	—
Profits on debt restructuring	—	—	—
Exchange gains of non-monetary assets	—	—	—
Donations received	—	—	—
Government subsidies	27,461,470.74	10,667,850.00	27,461,470.74
Others	94,878.35	—	94,878.35
Total	27,556,349.09	10,694,405.72	27,556,349.09

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APPENDIX II

(2) Government subsidies included in current profits and losses

	Amount in	Amount in	Pertinent to Assets/
Subsidy Items	Current Period	Previous Period	Pertinent to Income
Funding awards for key enterprises	2,430,000.00	700,000.00	Pertinent to income
supported in Haidian District
Subsidies for application for patent	53,440.00	15,780.00	Pertinent to income
Multimedia consumption platform	1,110,000.00		Pertinent to income
based on big data
Industrialization project for major	2,000,000.00		Pertinent to income
scientific and technological
achievement in Haidian District
RMB Five billion, Ten billion and	2,250,000.00		Pertinent to income
One Hundred Billion Project in
Zhongguancun Science Park
Informatization development project	3,000,000.00		Pertinent to income
supported in Beijing
Patent subsidies	230,000.00		Pertinent to income
National Torch Program Project in	2,000,000.00		Pertinent to income
2014
Funds from Beijing Zhongguancun	10,000.00		Pertinent to income
Enterprises Credit Promotion
Association (ECPA)
Funding awards from Beijing	550,000.00		Pertinent to income
Municipal Bureau of Radio, Film
and Television
Subsidies from Party Committee of	20,000.00		Pertinent to income
Beijing Internet Association
Financial support funds for	223,264.74	4,491,700.00	Pertinent to income
eco-friendly city
VAT tax deducted from special		370.00	Pertinent to income
equipment costs and technical
maintenance costs in VAT tax
control system
Cross-platform multi-screen display		3,000,000.00	Pertinent to income
technology industrialization project
Construction of patent early warning		60,000.00	Pertinent to income
mechanism for video player
Realization of triple screen		2,400,000.00	Pertinent to income
interactive internet TV
industrialization project
Special funds for film & TV cultural	13,579,766.00		Pertinent to income
industry development
Technical subsidies from Tianjin	5,000.00		Pertinent to income
Technology Development Bureau
Total	27,461,470.74	10,667,850.00

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FINANCIAL INFORMATION OF LESHI INTERNET

46. Non-operating expenses

				Amount
				Included in the
		Amount in	Amount in	Non-Recurring
Items		Current Period	Previous Period	Profit and Loss
Total disposal losses on non-current assets		474,357.08	1,167.33	474,357.08
Including:	losses on disposal of fixed assets	474,357.08	1,167.33	474,357.08
	Loss on disposal of intangible	—	—	—
	assets
Losses on	debt restructurin	—	—	—
Exchange	losses of non-monetary assets	—	—	—
Donation		42,293.29	1,000,000.00	42,293.29
Others		2,007,047.24	—	2,007,047.24
Total		2,523,697.61	1,001,167.33	2,523,697.61

47. Income tax expenses

(1) Composition of income tax expenses

Items Income tax expenses of current period Deferred income tax expenses Total	Amount in Current Period Amount in Previous Period 113,229,328.80 38,396,577.18 -169,126,784.84 -24,376,444.45 -55,897,456.04 14,020,132.73	Amount in Current Period Amount in Previous Period 113,229,328.80 38,396,577.18 -169,126,784.84 -24,376,444.45 -55,897,456.04 14,020,132.73
		14,020,132.73

(2) Adjustment process of accounting profit and income tax expense

	Amount in
Items	Current Period
Total profits	72,899,104.84
Income tax expense calculated as per legal/applicable tax rate	10,934,865.73
Influence on different applicable rates in subsidiary	-48,050,633.03
Influence on adjustment of income tax in previous period
Influence on nontaxable income	-3,428,597.90
Influence on nondeductible cost, expenses and loss	-17,637,976.17
Influence on deductible loss of unconfirmed deferred income tax assets
in the previous period	-1,058,328.29
Influence on deductible transient difference or deductible loss of
unconfirmed deferred income tax assets in the current period	3,343,213.62
Income tax expenses	-55,897,456.04

— 145 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Notes to items of cash flow statement

2. (1) Cash received relating to other operating activities

	Amount in	Amount in
Items	Current Period	Previous Period
Business cooperation cash deposit		1,000,000.00
Interest income	3,514,224.90	1,259,079.88
Government subsidies	27,461,470.74	10,667,850.00
Accounts receivable and payable	104,177,304.78	133,170,230.57
Others	3,984,660.82	329,745.39
Total	139,137,661.24	146,426,905.84

(2) Cash paid relating to other operating activities

	Amount in	Amount in
Items	Current Period	Previous Period
Advertising and production expenses	110,719,158.29	79,579,349.86
Consulting service cost	22,269,434.31	19,940,490.49
Office and conference expenses	21,169,326.01	14,263,407.67
Rental fees	23,311,235.74	10,544,244.98
Travelling expense	15,620,870.33	6,327,312.21
Service fees	4,641,546.60	3,587,418.22
Social engagement expenses	8,094,838.40	3,829,789.95
Current accounts	96,418,539.66	127,704,205.87
Transportation and vehicle expenses	4,180,298.92	3,195,507.83
Logistics and after-sales expenses	99,517,417.58	5,066,172.40
Others	16,072,616.96	43,033,021.05
Total	422,015,282.80	317,070,920.53
(3) Cash paid relating to other investing activities
	Amount in	Amount in
Items	Current Period	Previous Period
Charges for capital increase of subsidiary	3,912.09	14,242.20
Net cash received from the disposal of subsidiaries		638,934.55
Audit fees for investment activities		200,000.00
Total	3,912.09	853,176.75

— 146 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

• (4) Cash paid relating to other financial activities

	Amount in	Amount in
Items	Current Period	Previous Period
Cash deposit for handling acceptance bill of payment bank		22,500,000.00
Charges for cash dividends		402,974.99
Charges for credit rating		330,000.00
Registration and audit fees for issued bonds		999.00
Financial leasing expenses	27,529,193.63	2,340,305.00
Total	27,529,193.63	25,574,278.99

1. Supplementary information for cash flow statement

2. (1) Supplementary information for cash flow statement

	Amount in	Amount in
Supplementary Information	Current Period	Previous Period
1. Cash flows converted from net profits for business
operation activities:
Net Profit	128,796,560.88	232,380,750.50
Add: provision for impairment losses of assets	53,689,254.75	27,769,539.78
Depreciation of fixed assets, depletion of oil and gas assets,
and depreciation of productive biological assets	46,692,204.24	38,929,442.44
Amortization of intangible assets	1,032,639,064.94	587,085,449.21
Amortization of Long-term Deferred Expenses	317,023.31	—
Losses arising from disposal of fixed assets,
intangible assets and other long-term assets
(gains expressed with “-”)		—
Losses on fixed assets abandonment (profit is indicated by
“-”		1,167.33
Loss on changes in fair value (profit is indicated by “-”		—
Financial expenses (gains expressed with “-”	151,285,869.65	114,181,126.35
Investment loss (profit is indicated by “-”)	-5,038.44	1,355,138.81
Decrease in deferred income tax assets (increase expressed
with “-”)	-169,126,784.83	-24,376,444.45
Increase in deferred income tax liabilities (decrease
expressed with “-”)		—
Decrease of inventory (increase is indicated by “-”)	-471,152,317.73	-123,162,887.32
Decrease in receivables under operating activities (increase
is indicated by “-”)	-1,602,441,439.73	-978,264,760.88
Increase in payables under operating activities (decrease is
indicated by “-”)	994,837,302.93	271,839,256.33
Others	68,651,033.99	28,113,618.49
Net amount of cash flow generated from operating activities	234,182,733.96	175,851,396.59

— 147 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Supplementary Information 2. Major investing and financing activities that do not involve cash receipts and payments: Debt converted to equity Reclassification of convertible bonds expiring within one year as current liability Fixed assets under operating lease 3. Net changes in cash and cash equivalents: Cash at the end of the period Less: cash at the beginning of the period Plus: Cash equivalents at the end of the period Less: cash equivalents at the beginning of the period Net increase in cash and cash equivalents	Amount in Current Period Amount in Previous Period — — — — 198,488,283.63 34,702328.21 — — 447,348,595.63 585,718,105.29 585,718,105.29 193,520,396.46 — — -138,369,509.66 392,197,708.83	Amount in Current Period Amount in Previous Period — — — — 198,488,283.63 34,702328.21 — — 447,348,595.63 585,718,105.29 585,718,105.29 193,520,396.46 — — -138,369,509.66 392,197,708.83
		— 585,718,105.29 193,520,396.46 — — 392,197,708.83

(1) Net cash paid in current period and acquired from subsidiary

Items Cash or cash equivalents to be paid in the current period for enterprise merger occurred in the current period. Less: cash and cash equivalents held by subsidiaries on the date of purchase Add: cash or cash equivalents to be paid in current period for enterprise merger occurred in previous period. Net cash paid by subsidiary	Amount 270,000,000.00 30,795,263.03 239,204,736.97

(2) Composition of cash and cash equivalents

	Amount in	Amount in
Items	Current Period	Previous Period
I. Cash	447,348,595.63	585,718,105.29
Including: cash on hand	1,320,234.22	609,525.87
Deposit in bank ready for payment at any time	446,028,361.41	585,108,579.42
Other monetary funds ready for payment at any time	—	—
II. Cash equivalents	—	—
Include: bond investment due in three months	—	—
III.Closing balance of cash and cash equivalents	447,348,595.63	585,718,105.29
restricted cash and cash equivalents used by parent
company or subsidiaries

— 148 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

50. Assets with restricted ownership or right of use

Items Monetary funds Notes receivable Fixed assets Total	Closing Book Value Reason for Being Restricted 52,501,560.66 Note 1 52,501,560.66 /

• Note 1: RMB 48,501,560.66 refers to cash deposit for letter of guarantee and RMB 4,000,000.00 refers to cash deposit for bank acceptance bill.

51. Foreign currency monetary items

		Foreign		Commuted
		currency		RMB Balance
		balance at end		at the end of
Items		**of period **	Exchange rate	year
Monetary funds		12,551,127.87		33,702,763.93
Including:	USD	4,472,796.14	6.1190	27,369,039.59
	EUR	5,676.61	7.4556	42,322.54
	Hong Kong Dollar	7,945,395.62	0.7889	6,267,884.24
	Thai baht	127,259.50	0.1848	23,517.56
Accounts receivable		84,746.48	6.1190	518,563.69
Including:	USD	84,746.48	6.1190	518,563.69
	EUR
	Pound
Accounts receivable
Including:	USD
Accounts prepaid
Including:	USD
Short-term	loans
Including:	USD

— 149 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

VIII. Change of Consolidation Scope

1. Enterprise merger not under the same control

2. (1) Business combination not under common control in the current period

	Share		Share	Equity	Share
	Acquisition		Acquisition	acquisition	Acquisition
Name of acquiree	Time-Point		Cost	ratio (%)	Mode
Dongyang Flower Film & TV	April 2014	899,999,997.89		100%	Cash and
Co., Ltd.					issued shares
(Continued)
				Income of	Net Profit of
			Basis for	Acquiree from	Acquiree from
		determination		Acquisition	Acquisition
	Acquisition	of Acquisition		Date to the	Date to the
Name of acquiree	Date		Date	End of Period	End of Period
Dongyang Flower Film & TV	April 2014	Under control		231,412,837.74	104,632,609.18
Co., Ltd.

According to decision made in general meeting of stockholders, the Company and natural persons Cao Yong and Bai Yu signed the Agreement on Purchase of Assets by Cash and Issued Shares on September 30th, 2013, and the Company purchased 100% equities of Dongyang Flower Film & TV Co., Ltd. for RMB 900 million. Dongyang Flower Film & TV Co., Ltd. handled the industrial and commercial registration change procedure on March 20th, 2014. The Company has had substantial control right of it since asset transfer was finished in April 2014, and it has been included in the scope of consolidated financial statements since May 2014.

(2) Combined cost and business reputation

	Dongyang Flower Film
Combined cost	& TV Co., Ltd.
- Cash	270,000,000.00
- Fair value of the non-cash assets
- Fair value of the issued bond or bond incurred
- Fair value of the issued equity securities	629,999,997.89
- Fair value of contingent consideration
- Fair value of equities held before the date of purchase on that day
Total costs for enterprise merger	899,999,997.89
Less: fair value of identifiable net assets obtained	152,414,732.42
Business reputation	747,585,265.47

— 150 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Descriptions for confirming method of combined cost fair value or contingent consideration and change thereof:

For the underlying assets of RMB 900 million as agreed in the Agreement on Purchase of Assets by Cash and Issued Shares signed by the Company and Dongyang Flower Film & TV Co., Ltd., RMB 270 million was paid by the Company in cash. As for the residual amount, the issuer issued 21,305,377 shares based on the average stock exchange price of RMB 29.57/share within 20 trading days before pricing benchmark and identified it as fair value.

Main reasons for forming big amount of business reputation:

The Company paid consideration of RMB 899,999,997.89. The fair value of net assets was RMB 152,414,732.42 on the date of purchase, and validated goodwill value was RMB 747,585,265.47.

(3) Identifiable assets and liabilities of acquiree at acquisition date

	**Dongyang **	Flower Film &
	TV Co., Ltd.
	Fair value on	Book value on
Items	acquisition date	acquisition date
Assets:	312,645,296.92	287,444,213.70
Monetary funds	30,795,263.03	30,795,263.03
Notes receivable	22,500,000.00	22,500,000.00
Accounts receivable	26,193,072.50	26,193,072.50
Advance payment	38,472,246.40	38,472,246.40
Other receivables	353,198.64	353,198.64
Inventories	160,441,775.07	135,258,505.10
Other current assets	33,500,000.00	33,500,000.00
Fixed assets	54,909.40	37,096.15
Deferred income tax assets	334,831.88	334,831.88
Liabilities:	160,230,564.49	160,230,564.49
Accounts payable	1,000,000.00	1,000,000.00
Advances received	126,066,530.66	126,066,530.66
Payroll payable	157,856.30	157,856.30
Tax payable	32,716,202.53	32,716,202.53
Other receivables	289,975.00	289,975.00
Net Asset	152,414,732.43	127,213,649.21
Less: minority interests
Net assets acquired	152,414,732.43	127,213,649.21

— 151 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Method for confirming fair value of identifiable assets and liabilities:

Book value and fair value of inventory of Dongyang Flower Film & TV Co., Ltd. were RMB 135,258,505.10 and RMB 160,441,775.07 respectively on the date of purchase. The difference of RMB 25,183,269.97 is the added value of its scripts and films and TV plays.

Book value and fair value of fixed assets of Dongyang Flower Film & TV Co., Ltd. were RMB 37,096.15 and RMB 54,909.40 respectively on the date of purchase. The difference of RMB 17,813.25 is the added value from evaluation of its electronic equipment.

Acquiree’s contingent liability undertaken in enterprise merger: none

1. Change in consolidation scope due to other reasons

LeTV Sports Culture Development (Beijing) Co., Ltd. is added in the reporting period. It was established by the Company through direct investment, with shareholding ratio of 60%, and included in consolidation scope in March 2014.

LeTV Cloud Computing Co., Ltd. is added in the reporting period. It was established by the Company through direct investment, with shareholding ratio of 60%, and included in consolidation scope in July 2014.

LeTV Fortune (Beijing) Information Technology Co., Ltd. is added in the reporting period. It was established by the Company through direct investment, with shareholding ratio of 100%, and included in consolidation scope in April 2014.

LeTV E-commerce (Beijing) Co., Ltd. is added in the reporting period. It was established by the Company through direct investment, with shareholding ratio of 51%, and included in consolidation scope in April 2014.

IX. Equity in Other Bodies

1. Equity in subsidiaries

2. (1) Constitution of the Enterprise Group

	Main			Shareholding ratio	Shareholding ratio
	Business	Registered	Business	(%)		Gaining
Name of subsidiary	Place	in	nature	Direct	Indirect	Method
Beijing LeTV	Beijing	Beijing	Advertising	100.00		Investment
Streaming Media
Advertising Co.,
Ltd.

— 152 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

	Main			Shareholding ratio	Shareholding ratio
	Business	Registered	Business	(%)		Gaining
Name of subsidiary	Place	in	nature	Direct	Indirect	Method
LeTV Information	Tianjin	Tianjin	IT	100.00		Investment
Technology
(Tianjin) Co., Ltd.
LeTV Information	Shanghai	Shanghai	IT	100.00		Investment
Technology
(Shanghai) Co., Ltd.
LeTV Information	Hong Kong	Hong Kong	IT	100.00		Investment
Technology (Hong
Kong) Co., Ltd.
Leshi Zhixin	Tianjin	Tianjin	Production	58.55		Investment
Electronic			and sales
Technology			of products
(Tianjin) Limited
LeTV Cultural	Beijing	Beijing	Literature	51.00		Investment
Development			& art
(Beijing) Co., Ltd.			exchange,
			advertising
LeTV New Media	Tianjin	Tianjin	IT	100.00		Procurement
Culture (Tianjin)						of assets
Co., Ltd.						through
						share issue
Dongyang Flower	Dongyang	Dongyang	Film & TV	100.00		Procurement
Film & TV Co.,			culture			of assets
Ltd.						through
						share issue
LeTV Cloud	Beijing	Beijing	Data	60.00		Investment
Computing Co., Ltd.			processing,
			software
			development
LeTV Sports Culture	Beijing	Beijing	Culture &	60.00		Investment
Development			art
(Beijing) Co., Ltd.			exchange

— 153 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

	Main			Shareholding ratio	Shareholding ratio
	Business	Registered	Business	(%)			Gaining
Name of subsidiary	Place	in	nature	Direct	Indirect		Method
LeTV Fortune	Beijing	Beijing	Internet	100.00			Investment
(Beijing)			finance
Information
Technology Co.,
Ltd.
LeTV E-commerce	Beijing	Beijing	E-commerce	51.00			Investment
(Beijing) Co., Ltd.
(2) Significant non-wholly-owned subsidiaries
			Profit and
		Shareholding	loss				Equity
		ratio of	attributable	Dividends			balance of
		minority	to minority	assigned to		shareholders
		shareholders	shareholders	shareholders		**at **	the end of
Name of subsidiary		(%)	in this term	**in this **	term		term
Leshi Zhixin Electronic		41.45	-187,219,497.34			216,700,435.59
Technology (Tianjin)
Limited
LeTV Cultural Development		49.00	-1,691,988.70			2,254,715.13
(Beijing) Co., Ltd.
LeTV Cloud Computing	Co.,	40.00	-13,053,216.37			-9,053,216.37
Ltd.
LeTV Sports Culture		40.00	-32,173,561.85			-31,373,561.85
Development (Beijing) Co.,
Ltd.

— 154 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

• (3) Main financial information of important non-wholly-owned subsidiaries

				**Closing **	balance	balance
			Non-current			Current	Non-current
Name of subsidiary	Current assets:		assets:	Total Assets		liabilities	liabilities		Total liabilities
Leshi Zhixin Electronic
Technology (Tianjin) Limited	1,292,429,802.43		538,986,459.88 1,831,416,262.31		1,318,287,723.78			—	1,318,287,723.78
LeTV Cultural Development
(Beijing) Co., Ltd.	4,504,247.73		97,211.72	4,601,459.45		—		—	—
LeTV Cloud Computing Co., Ltd.	154,974,785.71		36,232,509.81	191,207,295.52	211,763,522.44			—	211,763,522.44
LeTV Sports Culture
Development (Beijing) Co.,
Ltd.	91,969,149.42		26,811,301.54	118,780,450.96	193,976,115.58			—	193,976,115.58
(Continued)
				Opening balance
			Non-current			Current	Non-current
Name of subsidiary	Current assets:		assets:	Total Assets		liabilities	liabilities		Total liabilities
Leshi Zhixin Electronic
Technology (Tianjin) Limited	598,587,071.93		179,273,337.67	777,860,409.60	404,074,826.48			—	404,074,826.48
LeTV Cultural Development
(Beijing) Co., Ltd.	8,389,598.45		89,719.73	8,479,318.18		12,336.20		—	12,336.20
LeTV Cloud Computing Co., Ltd.
LeTV Sports Culture
Development (Beijing) Co.,
Ltd.
				Amount in Current Period
							Total	Cash flow for
			Operating			comprehensive			business
Name of subsidiary			income	Net Profit			income		activities
Leshi Zhixin Electronic Technology
(Tianjin) Limited		4,107,196,586.15		-386,338,211.59		-386,338,211.59		-437,884,480.53
LeTV Cultural Development
(Beijing) Co., Ltd.			—	-3,865,522.53		-3,865,522.53			-285,338.78
LeTV Cloud Computing Co., Ltd.		130,722,973.32		-32,633,040.92		-32,633,040.92			-3,821,190.88
LeTV Sports Culture Development
(Beijing) Co., Ltd.		107,638,790.74		-80,433,904.62		-80,433,904.62			142,634.29
(Continued)

— 155 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		Amount in Previous Period	Amount in Previous Period
			Total	Cash flow for
	Operating		comprehensive		business
Name of subsidiary	income	Net Profit	income		activities
Leshi Zhixin Electronic Technology
(Tianjin) Limited	723,927,044.17	-47,340,774.64	-47,340,774.64	-53,716,133.40
LeTV Cultural Development
(Beijing) Co., Ltd.		-1,533,018.02	-1,533,018.02	-9,041,835.93
LeTV Cloud Computing Co., Ltd.
LeTV Sports Culture Development
(Beijing) Co., Ltd.

• (4) No important limitations on using enterprise group assets and paying off liabilities of the Company:

• Transactions controlling the subsidiaries in case of owner’s equity shares change of subsidiaries

• (1) Description on changes in owner’s equity of subsidiaries:

The Company has transferred 44% equities of its subsidiary LeTV Cultural Development (Beijing) Co., Ltd. in current period to LeTV Holdings (Beijing) Co., Ltd., and it held 51% equities of it as of December 31st, 2014. In April 2014, the Company purchased 99.5% equities of LeTV Holdings (Beijing) Co., Ltd. and Jiangsu Hongtu Venture Investment Management Co., Ltd., and it held 100% equities of LeTV New Media Culture (Tianjin) Co., Ltd. as of December 31st, 2014. The Company has increased capital to Leshi Zhixin Electronic Technology (Tianjin) Limited in current period, and it held 58.55% equities of it as of December 31st, 2014.

— 156 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (2) Influences of transactions on minority equity and owner’s equity attributable to the parent company:

Leshi Zhixin LeTV Cultural Electronic Production and Development Technology sales of (Beijing) Co., (Tianjin) products Ltd. Limited

Purchase cost/disposal consideration

• Cash - Fair value of the non-cash assets Total purchase cost/disposal consideration Less: subsidiary’s net asset shares calculated according to the ratio of acquired/disposed equities Difference Including: adjusting capital reserves Adjusting surplus reserves Adjusting undistributed profits

4,048,880.00 405,000,000.00 298,499,983.30 298,499,983.30 4,048,880.00 405,000,000.00

• 297,331,079.36 3,523,354.74 293,670,310.55 -1,168,903.94 -525,525.26 111,329,689.45 -1,168,903.94 -525,525.26 111,329,689.45

X. Risks relevant to financial instruments

The Company’s major financial instruments include loans, accounts receivable, accounts received in advance, accounts payable, bank deposit, etc. See disclosure of relevant notes for details. Major risks caused by these financial instruments are foreign exchange risk, credit risk and liquidity risk. The Company’s management manages and monitors these risks to ensure that appropriate measures can be taken timely and effectively.

1. Foreign exchange risk

Foreign exchange risk refers to the risk in foreign exchange rate change that affects the Company’s financial results and cash flow. Foreign exchange risk borne by the Company is mainly related to monetary capital held and purchase & sale business settled in USD. The Company faces this risk due to change of exchange rate between the Company’s functional currency and USD. See Note V. 51 for the balance of foreign currency assets and debts on the date of balance sheet.

2. Credit risk

As of December 31st, 2014, exposure of major credit risk that may cause financial loss to the Company was mainly from financial assets loss due to fulfillment failure of contract obligations of the other party, specifically the book value of the validated financial assets in the consolidated balance sheet.

Besides, the company’s circulating capital is deposited in bank of high credit rating, so credit risk of circulating capital is low.

— 157 —

APPENDIX II FINANCIAL INFORMATION OF LESHI INTERNET

Besides, the company’s circulating capital is deposited in bank of high credit rating, so credit risk of circulating capital is low.

3. Liquidity risk

During management of liquidity risk, the company keeps cash and cash equivalents regarded to be sufficient by the management, so as to meet the company’s business needs and reduce the effects of cash flow fluctuation. The company’s management monitors the use of bank loans and ensures that it complies with the loan agreement. The company regards bank loans as an important source of funds, and manages and adjusts capital structure with the change of economic conditions.

XI. Disclosure of fair value

None

XII. Affiliated Parties and Transactions

Related party identification standard: if a party controls, jointly controls or exerts significant influence over another party, or if two or more parties are under the control, joint control or significant influence of one party, the related party relationship is constituted.

1. Information of parent company of the Company

					Proportion of
				Proportion of	the Company’s
				the Company’s	voting rights
				shares held by	held by the
			Registered	the parent	parent
Name of Parent Company	Registered in Business nature		capital	company (%)	company (%)
Jia Yueting (natural person)	—	—	—	44.21	44.21

2. Information of subsidiaries of the Company

See Note VII: 1. “Equity in subsidiaries” for details of subsidiaries of the company.

— 158 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Information of other related parties of the Company

Name of other affiliated parties

LeTV Holdings (Beijing) Co., Ltd. Le Vision Pictures (Beijing) Co., Ltd Le Vision Pictures (Beijing) Co., Ltd. Beijing Wangjiu Electronic Commerce Co., Ltd. Xbell Union Communication Technology (Beijing) Co., Ltd. Beijing Leguo Culture Media (Beijing) Co., Ltd Huayunxuyang Cultural Development (Beijing) Co., Ltd.

LeTV Haiyun Culture Media (Beijing) Co., Ltd Xuritiansheng Investment Management (Beijing) Co., Ltd.

Shanxi Xibeier Communication Technology Co., Ltd. Le Vision Pictures (Tianjin) Co., Ltd. LeTV Mobile Intelligent Information Technology (Beijing) Co., Ltd. Hongchengxintai Real Estate Co., Ltd. Leka Automobile Intelligent Technology (Beijing) Co., Ltd.

Relation to the Company

Under the control of the same controller Under the control of the same controller Under the control of the same controller Under the control of the same controller Under the control of the same controller

Under the control of the same controller Under the control of the same controller

Under the control of the same controller Under the control of the same controller

Under the control of the same controller

Under the control of the same controller Under the control of the same controller

Under the control of the same controller Under the control of the same controller

1. Related transactions

2. (1) Related transactions on purchase and sale of goods, supply and labor service acceptance

3. A. Status of goods purchase and receiving labor services

	Related
	transaction	Amount in	Amount in
Related Party	contents	Current Period	Previous Period
Le Vision Pictures (Beijing) Co., Ltd.	Copyright purchase	43,471,337.50	17,000,000.00
	and advertising
Le Vision Pictures (Tianjin) Co., Ltd.	Copyright purchase	38,689,625.00
	and advertising
Beijing Leguo Culture Media	Copyright purchase	2,400,000.00
(Beijing) Co., Ltd
Shanxi Xibeier Communication	Rent	58,126.24
Technology Co., Ltd.
Beijing Wangjiu Electronic Commerce	Payment for goods	2,412,260.00
Co., Ltd.

— 159 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

• B. Table for goods sale / labor service rendering

	Related
	transaction	Amount in	Amount in
Related Party	contents	Current Period	Previous Period
LeTV Mobile Intelligent Information	Royalty income	58,300,000.00
Technology (Beijing) Co., Ltd.
Le Vision Pictures (Beijing) Co., Ltd.	Advertising income		5,590,824.06
	and payment for
	goods
Beijing Wangjiu Electronic Commerce	Advertising income	190,934.00	5,584,905.66
Co., Ltd.	and payment for
	goods
Le Vision Pictures (Tianjin) Co., Ltd.	Payment for goods		371,794.87
Beijing Leguo Culture Media	Payment for goods		5,470.09
(Beijing) Co., Ltd
Le Vision Pictures (Beijing) Co., Ltd	Payment for goods	14,700.00
(2) Related-party lease
		Confirmed	Confirmed
	Type of Leasing	Leasing Fee in	Leasing Fee in
Name of Lessor	Asset	This Term	Last Term
Hongchengxintai Real Estate	Houses lease	7,734,818.90
Le Vision Pictures (Beijing) Co., Ltd	Houses lease	614,821.00
Total		8,349,639.90

Description of related-party lease: lease houses as offices of the Company

• (3) Related-party guarantee

• A. The Company is not the guarantee

• B. The Company is the secured party:

				Whether
				guarantee has
				been
	Amount	Starting Date	Expiring Date	performed or
Guarantee	Guaranteed	of Guarantee	of Guarantee	not
Jia Yueting, LeTV Information	50,000,000.00	March 7th,	March 7th,	No
Technology (Tianjin) Co., Ltd.		2014	2015

— 160 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

				Whether
				guarantee has
				been
	Amount	Starting Date	Expiring Date	performed or
Guarantee	Guaranteed	of Guarantee	of Guarantee	not
Jia Yueting	200,000,000.00	March 20th,	March 19th,	No
		2014	2015
Beijing Xbell Communication	50,000,000.00	May 28th, 2014	April 10th,	No
Technology Co., Ltd., LeTV			2015
Information Technology
(Tianjin) Co., Ltd.
LeTV Information Technology	50,000,000.00	March 31st,	March 30th,	No
(Tianjin) Co., Ltd.		2014	2015
Jia Yueting, LeTV Information	100,000,000.00	June 18th, 2014	June 17th, 2015	No
Technology (Tianjin) Co., Ltd.
Jia Yueting	36,500,000.00	June 28th, 2012	27 June 2015	No
Jia Yueting	100,000,000.00	June 30th, 2014	29 June 2015	No
Jia Yueting	220,000,000.00	August 12th,	August 12th,	No
		2014	2016
Jia Yueting	90,000,000.00	August 29th,	August 18th,	No
		2014	2015
Jia Yueting	200,000,000.00	September	28 September	No
		29th, 2014	2015
Beijing Xbell Communication	80,000,000.00	November 18th,	November 18th,	No
Technology Co., Ltd., Leshi		2013	2015
Zhixin Electronic Technology
(Tianjin) Limited
Jia Yueting, LeTV Information	300,000,000.00	December 4th,	November 18th,	No
Technology (Tianjin) Co., Ltd.		2014	2015
Jia Yueting	100,000,000.00	December 25th,	December 25th,	No
		2014	2015
Jia Yueting, LeTV Information	150,000,000.00	August 21st,	August 20th,	No
Technology (Tianjin) Co., Ltd.		2014	2016
Jia Yueting, LeTV Information	100,000,000.00	June 23rd, 2014	June 23rd, 2015	No
Technology (Tianjin) Co., Ltd.
Jia Yueting	200,000,000.00	June 27th, 2014	27 June 2015	No

— 161 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

• (4) Fund lending/borrowing for related parties

Inter-Bank Lending Related Party Amount Starting Date Expiring Date Description Borrowing Jia Yueting 1,015,568,661.50 2014/12/10 2019/12/10 See the announcement 2014-116 for details Lending LeTV Mobile Intelligent 32,304.80 Information Technology (Beijing) Co., Ltd.

(5) The emoluments for key managerial personnel

	Amount in	Amount in
	Current	Previous
	Period	Period
	(RMB ten	(RMB ten
Items	thousand)	thousand)
Jia Yueting	60	60
Liu Hong	60	60
Jia Yuemin	54	54
Gao Fei	73.5	60
Lei Zhenjian	67.5	54
Liang Jun	116.4	116
Jin Jie	51	42
Yang Yongqiang	48	48
Wu Yazhou	72	62
Liu Gang	48	48
Tan Shu	66	66
Yang Lijie	54	54
Zhang Te	44.4	33.6

— 162 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (6) Other related transactions

• Receivables and payables of related party

• (1) Receivables

			**Closing **	balance			Closing balance	Closing balance
			Book	Bad-debt			Book	Book
Project name		Related Party	balance	provision			balance	balance
Accounts receivable		Beijing Wangjiu	50,852.00	1,525.56
		Electronic Commerce
		Co., Ltd.
Accounts receivable		LeTV Mobile	58,300,000.00	1,749,000.00
		Intelligent Information
		Technology (Beijing)
		Co., Ltd.
Other	receivables	Xbell Union	5,000.00	150.00
		Communication
		Technology (Beijing)
		Co., Ltd.
Other	receivables	LeTV Mobile	32,304.80	969.14
		Intelligent Information
		Technology (Beijing)
		Co., Ltd.
Accounts prepaid		Beijing Leguo Culture	760,000.00			1,000,000.00
		Media (Beijing) Co.,
		Ltd
Accounts prepaid		Shanxi Xibeier	8,303.76
		Communication
		Technology Co., Ltd.
(2)	Payables
Project name		Related Party		**Closing **	balance		Opening balance
Accounts receivable		Le Vision Pictures (Beijing)		66,700,000.00				26,200,000.00
		Co., Ltd.
Accounts receivable		Le Vision Pictures (Tianjin)		35,500,000.00
		Co., Ltd.
Other receivables		Le Vision Pictures (Beijing)			1,000.00			1,000.00
		Co., Ltd.
Other receivables		Le Vision Pictures (Beijing)		614,821.00
		Co., Ltd
Other receivables		Hongchengxintai	Real Estate	7,734,818.90

— 163 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

XIII.Share-based payment

1. Overall condition of share-based payment

• Total equity instruments granted by the Company in the current period

6,256,720.00

• Total exercised equity instruments of the Company in current period

3,304,267.20

• Total invalid equity instruments of the Company in current period

1,898,526.20

• Scope of option exercise price of shares issued by the Company at the end of the period and remaining period of the contract

Option exercise prices of shares issued by the Company at the end of the period are RMB 7.999, RMB 12.239 and RMB 42.26, and the latest exercise time is July 24th, 2018.

• The range of the exercise prices for the other outstanding equity instruments of the Company at the end of the period, and the remaining contract period

None

1. Condition of equity-settled share-based payment

2. Measures for the confirmation of the fair value of the equity instruments on the grant date

Black-Scholes model

• Basis for determining the number of the vested equity instruments

Revise the estimated number of exercisable share options according to the latest number of exercisable staff, completion of performance indexes and other follow-up information.

• Reasons for any significant difference between the estimate in current period and the one in previous period

None

160,094,465.12

• Accumulative amount of equity-settled share-based 160,094,465.12 payment included in capita reserve

• Accumulative amount of equity-settled share-based 106,561,460.28 payment included in capita reserve

• Condition of modification and termination of share-based payment

None

— 164 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Others

XIV. Commitments and Contingencies

1. Major commitments

Information of irrevocable leasing contract signed by the Company as of December 31st, 2014 is shown below:

(1) Major commitments

Minimum payment for irrevocable business lease (RMB Ten The 1st year after the balance sheet date The 2nd year after the balance sheet date Total	Amount Thousand) 4,673.73 3,833.97
	8,507.70

(2) Financing lease

The Company has signed general lease agreement with Huipu Leasing Co., Ltd., with total rent of RMB 18,483,760.00. The Company pays the rent quarterly (post-paid), the amount in each phase is RMB 1,540,305.00, and there are 12 phases in total:

	Amount
Tenancy	(RMB Ten Thousand)
The 1st year after the balance sheet date	6,161,220.00
The 2nd year after the balance sheet date	4,621,015.00
Total	10,782,235.00

The Company has signed general lease agreement with Huipu Leasing Co., Ltd., with total rent of RMB 3,617,734.48. The Company pays the rent quarterly (post-paid), the amount in each phase is RMB 301,469.54, and there are 12 phases in total:

	Amount
Tenancy	(RMB Ten Thousand)
The 1st year after the balance sheet date	1,205,878.16
The 2nd year after the balance sheet date	1,205,978.16
Total	2,411,856.32

— 165 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

The Company has signed general lease agreement with Huipu Leasing Co., Ltd., with total rent of RMB 16,543,905.52. The Company pays the rent quarterly (post-paid), the amount in each phase is RMB 1,378,650.46, and there are 12 phases in total:

	Amount
Tenancy	(RMB Ten Thousand)
The 1st year after the balance sheet date	5,514,601.84
The 2nd year after the balance sheet date	5,514,601.84
Total	11,029,203.68

The Company has signed financing lease agreement of fixed assets with Beijing Branch of China Telecommunications Corporation (China Telecom), with total rent of RMB 7,411,950.36. The Company pays the rent quarterly (post-paid), the amount in each phase is RMB 617,662.53, and there are 12 phases in total:

	Amount
Tenancy	(RMB Ten Thousand)
The 1st year after the balance sheet date	2,470,650.12
The 2nd year after the balance sheet date	2,470,650.12
Total	4,941,300.24

The Company has signed general lease agreement with Huipu Leasing Co., Ltd., with total rent of RMB 4,306,060.00. The Company pays the rent quarterly (post-paid), the amount in each phase is RMB 358,830.00, and there are 12 phases in total:

	Amount
Tenancy	(RMB Ten Thousand)
The 1st year after the balance sheet date	1,435,320.00
The 2nd year after the balance sheet date	1,435,320.00
Total	2,870,640.00

The Company has signed general lease agreement with Huipu Leasing Co., Ltd., with total rent of RMB 25,884,610.00. The Company pays the rent quarterly (post-paid), the amount in each phase is RMB 2,157,142.50, and there are 12 phases in total:

	Amount
Tenancy	(RMB Ten Thousand)
The 1st year after the balance sheet date	8,628,170.00
The 2nd year after the balance sheet date	8,628,170.00
Total	17,256,340.00

— 166 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

The Company has signed financing lease agreement of fixed assets with Minsheng Financial Leasing Co., Ltd., with total rent of RMB 161,100,574.40. The Company pays the rent quarterly (post-paid), the amount in each phase is RMB 20,137,571.80, and there are 8 phases in total:

Tenancy (RMB The 1st year after the balance sheet date The 2nd year after the balance sheet date Total	Amount Ten Thousand) 80,550,287.20 60,412,715.40
	140,963,002.60

1. Contingencies

None

XV. Events Occurring after the Balance Sheet Date

1. Important non-adjusting events

None

1. Distribution of profits

Audited by Huapu Tianjian Certified Public Accountants (special general partnership), the parent company obtained net profits of RMB 533,600,023.89 in 2014. In accordance with Company Law and Articles of Association, legal surplus reserves were RMB 53,360,002.39 after withdrawn at 10% of net profits, and the distributable net profits for shareholders were RMB 843,360,350.78 as of December 31st, 2014 after opening undistributed profits of RMB 500,488,220.42 were added and 2014 annual distributed profits of RMB 26,349,369.78 were deducted.

The 2014 annual profit distribution plan proposed by board of directors of the Company is shown below: based on general capital of 841,190,063 shares of the Company, distribute cash dividend of RMB 0.46 (tax included) every 10 shares to all shareholders, with a total amount of RMB 38,694,742.90 (tax included); for capital reserves, transfer 10 shares to 12 shares to all shareholders, the total amount transferred are 1,009,428,076 shares, and general capital is increased to 1,850,618,139 shares after that; and the remaining undistributed profits are carried down to the next year.

1. Sales return

None

— 167 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

4. Description of other events occurring after the balance sheet date

According to decision made at the 45th Meeting of the 2nd Board of Directors of the Company, since other shareholders of LeTV and Zhejiang CHS Media Co., Ltd. (hereinafter referred to as “CHS Media” or “target company”) signed the Agreement on Purchase of Assets by Cash and Issued Shares with Wuhan Double Co., Ltd. (hereinafter referred to as “Double”) and Wuhan Xinxinghanyi Chemical Co., Ltd. on June 10th, 2014, film and TV companies have been affected by industrial policies and market environment to different degrees. Performance of CHS Media decreases in 2014 compared with the expected one. To promote major assets reorganization of CHS Media and Double, the board of directors agreed to reappraise equities of CHS Media, adjust pricing of selling the LeTV’s equities of CHS Media to Double accordingly, revise the Agreement on Purchase of Assets by Cash and Issued Shares and continue the transaction between LeTV and CHS Media as well as other shareholders of CHS Media. Specific adjustment scheme is shown as follows:

(I) Transaction price of LeTV’s 5.26% equity of target company

Transfer price of LeTV’s 3,155,334 shares of target company (accounting for 5.26% of registered capital of target company, hereinafter referred to as “target equities”) is based on the appraisal results in Assets Appraisal Report (after adjustment) (ZQHPBZ [2014] No. 1119) issued by China Enterprise Appraisals Co., Ltd. with securities business qualification. Through negotiation between both parties, final transaction price of 100% equities of CHS Media is RMB 650 million, transaction price of LeTV’s 5.26% equity of target company is RMB 34,182,785, and Double will purchase LeTV’s equities of target company by issuing shares and paying RMB 6,573,612.50 in cash.

(II) Number of shares issued by Double to LeTV for payment of share consideration

Calculation formula of number of shares issued by Double to LeTV for payment of share consideration is shown below:

Number of shares issued = (transaction price of target assets - amount paid in cash)/issue price

Transfer price of target equities held by LeTV is RMB 34,182,785. After the amount of RMB 6,573,612.50 paid in cash is deducted, Double will pay with 2,349,716 shares with issue value of RMB 27,609,172.50.

The above items were finished on February 12th, 2015.

XVI. Other Important Events

1. Information of segments

• (1) Determination basis and accounting policy for report segments:

The Company establishes its operating segments based on the internal organizational structure, management requirements and internal reporting system, and reports the segment information based on the operating segments.

— 168 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Business segment refers to a part of the Company to meet the following conditions at the same time: (1) the part can generate income and incur expenses in daily activities; (2) the Company’s management can regularly evaluate the business performance of this part to determine to distribute resources and evaluate its performance; (3) the Company can obtain financial situation, business performance, cash flow and other relevant accounting information of the part.

Reportable segments of the Company include:

• ① Distribution of films & TV plays: take business of Dongyang Flower Film & TV Co., Ltd. as a reportable segment

• ② Terminal business: take business of Leshi Zhixin Electronic Technology (Tianjin) Limited as a reportable segment;

• ③ Internet service: take other business excluding distribution of films & TV plays and terminal business as a reportable segment.

Accounting policies for business segment of the Company is the same as the Company’s main accounting policies.

• (2) Financial information of report segments

				Eliminations
	Distribution of			among
Items	films & TV plays	Terminal business	Internet service	inter-segments	Total
Operating income	231,412,837.74	4,107,196,586.15	3,232,023,568.91	-751,694,370.42	6,818,938,622.38
Operating costs	94,620,734.70	4,104,914,967.83	2,187,199,687.16	-558,601,921.27	5,828,133,468.42
Total assets	418,723,644.51	1,831,416,262.31	11,103,961,373.99	-4,503,078,033.68	8,851,023,247.13
Total liabilities	186,877,386.13	1,318,287,723.78	6,829,594,975.43	-2,827,210,234.23	5,507,549,851.11

There was no other important matter of the Company as of December 31st, 2014.

— 169 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

XVII. Notes to Key Items of Parent Company’s Financial Statement

1. Accounts receivable

2. (1) Disclosure of accounts receivable by category

Type Accounts receivable with individually significant amounts and individual provision for bad debt reserves Accounts receivables of bad-debt provision withdrawn through credit risk characteristic combination Combination 1: aging combination Combination 2: other combination Receivables without individually significant amounts but individual provision for bad debt reserves Total (Continued) Type Accounts receivable with individually significant amounts and individual provision for bad debt reserves Accounts receivables of bad-debt provision withdrawn through credit risk characteristic combination Combination 1: aging combination Combination 2: other combination Receivables without individually significant amounts but individual provision for bad debt reserves Total	Closing balance Book balance Bad-debt provision Amount Proportion (%) Amount Withdrawing Percentage (%) — — — — 1,619,188,415.41 100.00 69,713,410.01 4.31 1,474,396,576.57 91.06 69,713,410.01 4.73 144,791,838.84 8.94 — — — — — — 1,619,188,415.41 100.00 69,713,410.01 4.31 Opening balance Book balance Bad-debt provision Amount Proportion (%) Amount Withdrawing Percentage (%) 919,331,338.54 100.00 34,617,338.74 3.77 919,331,338.54 100.00 34,617,338.74 3.77 919,331,338.54 100.00 34,617,338.74 3.77	Book value — 1,549,475,005.40 1,404,683,166.56 144,791,838.84	Book value — 1,549,475,005.40 1,404,683,166.56 144,791,838.84
		1,549,475,005.40
			Book value 884,713,999.80 884,713,999.80
			884,713,999.80

— 170 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

① Receivables for withdrawing bad-debt provision by aging analysis method in combination

Aging Within one year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years Total	Closing balance Accounts receivable Bad-debt provision Withdrawing Percentage 1,231,111,161.68 36,933,334.85 3.00% 191,743,984.59 19,174,398.46 10.00% 48,660,153.84 12,165,038.46 25.00% 2,718,789.45 1,359,394.73 50.00% 162,487.01 81,243.51 50.00% — — 0.00% 1,474,396,576.57 69,713,410.01 4.73%	Closing balance Accounts receivable Bad-debt provision Withdrawing Percentage 1,231,111,161.68 36,933,334.85 3.00% 191,743,984.59 19,174,398.46 10.00% 48,660,153.84 12,165,038.46 25.00% 2,718,789.45 1,359,394.73 50.00% 162,487.01 81,243.51 50.00% — — 0.00% 1,474,396,576.57 69,713,410.01 4.73%
		4.73%

• ② Other receivables for withdrawing bad-debt provision by other methods in combination

Type Receivables of subsidiaries within consolidation scope Total	Closing balance Accounts receivable Bad-debt provision Withdrawing Percentage 144,791,838.84 144,791,838.84

• (2) Provision for withdrawn, returned or transferred bad debt in current period

Withdrawn bad-debt provision in current period is RMB 35,096,071.27; and no returned or transferred bad-debt provision occurs in current period.

• (3) Receivables of first five companies with the greatest amount of closing amount (categorizing by debtor)

Total amount of receivables of first five companies with the greatest amount in the current reporting period (categorizing by debtor) is RMB 431,711,472.90, accounting for 26.66% of total closing balance, and the total amount of relevant withdrawn bad-debt reserves is RMB 8,875,535.23.

— 171 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

1. Other receivables

2. (1) Disclosure of other receivables by category

				Closing balance
	Book balance			Bad-debt provision
					Withdrawing
		Proportion			percentage
Type	Amount		(%)	Amount		(%)	Book value
Other receivables with individually
significant amounts and individual
provision for bad debt reserves	—		—	—		—	—
Other accounts receivables of bad-debt
provision withdrawn through credit
risk characteristic combination	1,617,437,559.01		100.00	496,749.95		0.03	1,616,940,809.06
Combination 1: aging combination	3,801,601.87		0.24	496,749.95		13.07	3,304,851.92
Combination 2: other combinatio	1,613,635,957.14		99.76	—		—	1,613,635,957.14
Other receivables without individually
significant amounts but individual
provision for bad debt reserves	—		—	—		—
Total	1,617,437,559.01		100.00	496,749.95		0.03	1,616,940,809.06
(Continued)
			Opening balance
	Book balance			Bad-debt provision			Book value
					Withdrawing
Type	**Amount **	Proportion (%)		Amount	Percentage (%)
Other receivables with individually
significant amounts and individual
provision for bad debt reserves
Other accounts receivables of bad-debt
provision withdrawn through credit
risk characteristic combination	887,105,534.42		100.00	688,721.66		0.08	886,416,812.76
Combination 1: aging combinatio	11,273,910.82		1.27	688,721.66		6.11	10,585,189.16
Combination 2: other combination	875,831,623.60		98.73	875,831,623.60
Other receivables without individually
significant amounts but individual
provision for bad debt reserves
Total	887,105,534.42		100.00	688,721.66		0.08	886,416,812.76

① Other receivables for withdrawing bad-debt provision by aging analysis method in combination

— 172 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Aging Within one year 1-2 years 2-3 years 3-4 years 4-5 years More than 5 years Total	Closing balance Other receivables Bad-debt provision Withdrawing Percentage (%) 936,007.13 28,080.21 3.00 1,936,014.93 193,601.49 10.00 758,886.61 189,721.65 25.00 170,693.20 85,346.60 50.00 — — — — 3,801,601.87 496,749.95 13.07	Closing balance Other receivables Bad-debt provision Withdrawing Percentage (%) 936,007.13 28,080.21 3.00 1,936,014.93 193,601.49 10.00 758,886.61 189,721.65 25.00 170,693.20 85,346.60 50.00 — — — — 3,801,601.87 496,749.95 13.07
		13.07

• ② Other receivables for withdrawing bad-debt provision by other methods in combination

Type Receivables of subsidiaries within consolidation scope fund of disbursement required Total	Closing balance Other receivables Other receivables 1,597,760,072.37 15,875,884.77 1,613,635,957.14	Closing balance Other receivables Other receivables 1,597,760,072.37 15,875,884.77 1,613,635,957.14

(2) Provision for withdrawn, returned or transferred bad debt in current period

Withdrawn bad-debt provision of current year is decreased by RMB 191,971.71; and no returned or transferred bad-debt provision occurs in current period.

(3) Other receivables classified by nature of money

Nature of funds Accounts receivable and payable Deposit and loan Security Deposit Total	Closing Book Balance 1,597,718,303.65 15,917,653.49 3,801,601.87 1,617,437,559.01	Opening Book Balance 876,041,110.34 7,080,007.70 3,984,416.38
		887,105,534.42

— 173 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

• (4) Other receivables of top five companies with the greatest closing amount based on the debtor’s categorizing

Company Name Nature of Funds LeTV Information Technology (Tianjin) Co., Ltd. Accounts receivable and payable LeTV Cloud Computing Co., Ltd. Accounts receivable and payable LeTV Sports Culture Development (Beijing) Co., Ltd. Accounts receivable and payable Leshi Zhixin Electronic Technology (Tianjin) Limited Accounts receivable and payable Equity incentive Taxation Total	Closing balance Aging Proportion of total closing balance of other receivables (%) Closing Blance of Bad-debt Provision 1,174,396,216.12 Within one year 72.61 202,901,103.16 Within one year 12.54 182,898,799.13 Within one year 11.31 37,489,880.44 Within one year 2.32 9,746,472.05 Within one year 0.60 1,607,432,470.90 — 99.38	Closing balance Aging Proportion of total closing balance of other receivables (%) Closing Blance of Bad-debt Provision 1,174,396,216.12 Within one year 72.61 202,901,103.16 Within one year 12.54 182,898,799.13 Within one year 11.31 37,489,880.44 Within one year 2.32 9,746,472.05 Within one year 0.60 1,607,432,470.90 — 99.38

3. Long-term equity investment

• (1) Book value of long-term equity investment

Invested Company Investment to the subsidiary Investment to joint and cooperative enterprises Total	Closing balance Book balance Depreciation reserves 2,424,070,405.43 2,424,070,405.43	Book value 2,424,070,405.43 2,424,070,405.43	Opening balance Book balance Depreciation reserves 684,130,186.24 318,733.87 684,448,920.11	Book value 684,130,186.24 318,733.87
				684,448,920.11

— 174 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

(2) Investment to the subsidiary

Invested Company LeTV Information Technology (Tianjin) Co., Ltd. Beijing LeTV Streaming Media Advertising Co., Ltd. Letv Information Technology (Hong Kong) Co., Ltd. LeTV (Shanghai) Information Technology Co., Ltd. Leshi Zhixin Electronic Technology (Tianjin) Limited LeTV Cultural Development (Beijing) Co., Ltd. LeTV New Media Culture (Tianjin) Co., Ltd. Dongyang Flower Film & TV Co., Ltd. LeTV Sports Culture Development (Beijing) Co., Ltd. LeTV Cloud Computing Co., Ltd. Total	Opening balance 367,021,142.55 3,000,000.00 120,156,443.69 500,000.00 182,452,600.00 9,500,000.00 1,500,000.00	Increase in Current Period 102,644,017.00 430,681,167.00 298,499,983.30 899,999,997.89 4,438,240.00 8,076,814.00 1,744,340,219.19	Decrease in Current Period 4,400,000.00	Closing Balance 367,021,142.55 3,000,000.00 222,800,460.69 500,000.00 613,133,767.00 5,100,000.00 299,999,983.30 899,999,997.89 4,438,240.00 8,076,814.00 2,424,070,405.43	Depreciation reserves withdrawn in current period	Ending Depreciation reserves Balance of depreciation reserves
	684,130,186.24		4,400,000.00

1. Investment to joint and cooperative enterprises

Invested company Invested company Beijing Yilianweida Technology Co., Ltd. Total	The Beginning of the Period Remaining amount 318,733.87 318,733.87	Additional investment	Increase and Decrease Variation Negative investment Investment profit and loss recognized with equity method -238,038.46 -80,695.41 -238,038.46 -80,695.41	of the Term Other equity change	Other equity change

(Continued)

— 175 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Invested company Increase and Decrease Variation of the Term Distribution of cash dividends or profit Withdrawal of impairment provision I. Joint venture Beijing Yilianweida Technology Co., Ltd. Total	Closing balance Ending Depreciation reserves Balance of depreciation reserves Others	Closing balance Ending Depreciation reserves Balance of depreciation reserves Others

5. Operating income and operating cost

Items Amount in Current Period Income Cost Main business 2,359,676,820.96 1,254,089,053.34 Total 2,359,676,820.96 1,254,089,053.34 6. Investment income Items Long-term equity investment income measured by employing cost method Long-term equity investment income measured by employing equity method Investment income for disposing long-term equity investment production Financial assets which is measured by fair value and the income from investment, variation of which is recorded into the profits and losses of the current period Financial assets which is measured by fair value and the income from investment, variation of which is recorded into the profits and losses of the current period Income of held-to-maturity investment during holding period Investment income during the period of holding available-for-sale financial assets Investment income resulting from disposal of available-for-sale financial assets Gains of remaining equity re-measured at fair value after control right loss Total	Amount in Previous Period Income Cost 1,466,809,712.09 786,595,665.43 1,466,809,712.09 786,595,665.43 Amount in Current Period Amount in Previous Period -80,695.41 -90,791.38 -589,158.46 -1,590,474.75 -669,853.87 -1,681,266.13	Amount in Previous Period Income Cost 1,466,809,712.09 786,595,665.43 1,466,809,712.09 786,595,665.43 Amount in Current Period Amount in Previous Period -80,695.41 -90,791.38 -589,158.46 -1,590,474.75 -669,853.87 -1,681,266.13
		-1,681,266.13

— 176 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

XVIII. Supplementary Information

1. **Detailed statement of non-recurring profit and loss in **	current period
Items	Amount	Description
Non-current assets disposal profit and loss	-474,357.08
Tax returns, reduction and exemptions with unauthorized	—
approval or without official approval documents
Governmental subsidies included in the current profit and loss	27,461,470.74	See details of
(except that closely related to business events and		government
governmental subsidies received by a certain quota or		subsidies.
quantity according to the national unified standard)
Fund possession costs taken from non-financial businesses to
be included in the current profit and loss
Corporation investment costs of acquiring subsidiaries,	—
affiliated businesses and joint ventures that are smaller than
the revenues incurred from the identifiable net assets fair
value of the invested companies when the investment
occurred
Exchange losses of non-monetary assets	—
Profits and losses of assets invested or managed by	323,772.31
entrustment
Assets for impairment withdrawn due to force majeur such as
natural disasters
Profits and losses on debt restructuring	—
Corporate restructuring costs, such as fees on staffing and	—
integration
Profits and losses exceeding the fair value part due to an	—
unfair transaction price during the transaction
Net profit and loss during the term from the initial time of	—
the subsidiary by business merger until the merging date
under a same control condition
Profit and loss caused by contingencies that are irrelevant to	—
Company’s normal businesses
Profits and losses from variation of fair value by holding	—
transactional financial assets, transactional financial liability
and investment incomes from handling transactional
financial assets, transactional financial liability and salable
financial assets, in addition to the valid arbitrage hedging
business related to normal corporate business
Reversing assets impairment of receivables for independent	—
impairment test
Profit and loss obtained from foreign entrusted loans	—

— 177 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items	Amount	Description
Profit and loss from fair value variation of investment real	—
estate by adopting fair value mode for follow-up calculation
Influence on the current profit and loss by one-time	—
adjustment as per laws and regulations on taxes and
accounting
Trustee fee income from entrusted operation	—
Non-operating income and expenditure in addition to the	-2,273,196.05	Ex-warehouse
above-mentioned items		loss
Other profit and loss items conforming to the definition of
non-recurring profit and loss
Income tax impact amounts	6,565,224.56
Minority equity impact amounts	-513,309.05
Total	18,985,774.41

2. Return on net assets and earnings per share

		**Earnings **	Per Share
	Return on	(EPS)
	weighted		Diluted
	average net		earnings
Profits during Report Period	assets (%)	Basic EPS	per share
Net profits attributable to common corporate
shareholders	13.83	0.44	0.43
Net profits attributable to common corporate
shareholders after the deduction of the non-recurring
profit and loss	13.10	0.42	0.41

— 178 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

3. Further information of change of accounting policies

In accordance with eight accounting standards including the Accounting Standards for Enterprises No.2 - Long-term Equity Investments released by Ministry of Finance in 2014, the Company has changed its relevant accounting policies and made a retrospect restatement by comparing the financial statements. The consolidated balance sheets on of Jan. 1st, 2013 and Dec. 31st, 2013 after the restatement are as follows:

Items Current assets: Monetary funds Financial assets measured at fair value and the changes are included into current profits and losses Notes receivable Accounts receivable Advance payment Interest receivable Dividend receivable Other receivables Inventories Classified as liabilities held for sale non-current assets maturing with one year Other current assets Total current assets Non-current assets: Financial assets available for sale Held-to-maturity investments Long-term accounts receivable Long-term equity investments Investment real estate Fixed assets Construction-in-progress Project materials Disposal of fixed assets Productive biological assets Oil and gas assets Intangible assets Development expenses	Jan. 1st, 2013 193,520,396.46 4,867,634.38 370,951,795.99 246,774,685.95 9,254,098.20 26,660,434.03 39,377,223.96 891,406,268.97 20,000,000.00 178,687,224.06 1,751,115,466.58 56,705,158.49	Dec. 31st, 2013 608,218,105.29 54,363,352.84 950,248,021.06 46,613,337.42 33,148,535.63 146,626,151.46 23,000,000.00 1,862,217,503.70 20,000,000.00 318,733.87 179,456,277.57 2,641,514,257.40 65,931,646.89	Dec. 31st, 2014 499,850,156.29 11,337,263.64 1,892,606,343.05 298,718,272.52 75,839,386.69 733,526,978.69 73,000,000.00
			3,584,878,400.88
			20,000,000.00 343,015,085.10 3,338,541,906.06 388,056,048.72

— 179 —

APPENDIX II FINANCIAL INFORMATION OF LESHI INTERNET

Items Business reputation Long-term unamortized expenses Deferred income tax assets Other non-current assets Sub-total of Non- current assets Total assets Current liabilities: Short-term Loans Financial assets measured at fair value and the changes are included into current profits and losses Notes payable Accounts payable Receipts in advance Payroll payable Tax payable Interest payable Dividend payable Other payables Classified as liabilities held for sale non-current liabilities due within one year Other current liabilities Total current liabilities Non-current liabilities: Long-term borrowing Bonds payable Including: preferred shares Perpetual capital Bonds payable receivables long-term equity Long-term Long term payroll payable Special accounts payable Accrued liability Deferred revenue Deferred income tax liabilities Other non-current liabilities Total Non Current Liabilities Total liabilities	Jan. 1st, 2013 854,892.91 2,380,521.03 0.00 2,009,743,263.07 2,901,149,532.04 508,900,000.00 327,451,670.46 6,828,378.59 5,154,888.46 86,195,713.29 20,895,645.18 21,828,068.85 127,327,059.21 8,978,950.44 1,113,560,374.48 33,700,000.00 395,591,961.24 77,013,376.28 7,856,581.63 514,161,919.15 1,627,722,293.63	Dec. 31st, 2013 26,756,965.48 224,129,581.31 3,158,107,462.52 5,020,324,966.22 970,000,000.00 22,500,000.00 782,182,977.60 44,327,746.55 2,948,210.24 155,624,444.69 25,835,645.21 12,707,190.76 291,021,929.44 199,453,333.34 2,506,601,477.83 16,700,000.00 398,610,488.94 18,887,248.92 434,197,737.86 2,940,799,215.69	Dec. 31st, 2014 747,585,265.47 1,930,683.00 196,218,582.19 230,797,275.71
			5,266,144,846.25
			8,851,023,247.13
			1,388,000,000.00 20,000,000.00 1,605,289,561.49 323,395,607.04 3,009,132.52 409,757,631.22 15,200,173.46 11,118,812.41 27,349,670.91 401,148,171.00 199,606,666.61
			4,403,875,426.66
			81,873,823.68 6,231,939.27 1,015,568,661.50 1,103,674,424.45
			5,507,549,851.11

— 180 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Owner’s equities: Equity Other equity instruments Including: preferred shares Perpetual capital Capital reserve Less: treasury stock Other comprehensive income Special reserves Surplus reserve General risk preparation Undistributed profit Total equity attributable to equity holders of the Company Minority shareholder’s equity Total owner’s equities Total liabilities and owner’s equity	Jan. 1st, 2013 418,000,000.00 438,158,704.60 -102,998.38 34,741,115.73 353,794,761.11 1,244,591,583.06 28,835,655.35 1,273,427,238.41 2,901,149,532.04	Dec. 31st, 2013 798,466,298.00 179,633,637.80 -1,205,362.95 63,605,357.83 559,040,213.83 1,599,540,144.51 479,985,606.02 2,079,525,750.53 5,020,324,966.22	Dec. 31st, 2014 841,190,063.00 1,366,018,527.78 -706,643.49 116,965,360.22 843,360,350.78 3,166,827,658.29 176,645,737.73 3,343,473,396.02
			8,851,023,247.13

4. Others

None

— 181 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• B. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF LESHI INTERNET FOR THE YEAR ENDED 31 DECEMBER 2015

Section X Financial Report

I. Audit report

Type of audit opinion Standard unqualified audit opinion Date of signing of audit report March 17th, 2016 Name of audit institution SHINEWING Certified Public Accountants (special general partnership) Reference number of audit report XYZH/2016XAA10363 Name of CPA Chang Xiaobo, Bai Ximin

Audit report

XYZH/2016XAA10363

All shareholders of Leshi Internet Information & Technology Corp (Beijing):

We have audited the attached financial statements of Leshi Internet Information & Technology Corp (Beijing) (hereinafter referred to as Letv), including the consolidated and parent company’s balance sheets as at December 31st, 2015, the consolidated and parent company’s income statements, the consolidated and parent company’s cash flow statements, the consolidated and parent company’s statements of changes in owners’ equity for the year 2015, and notes to financial statements.

1. Management’s responsibility for the financial statements

Preparing and fairly presenting financial statements are responsibilities of the Letv’s management. These responsibilities include (1) preparing the financial statements in accordance with Accounting Standards for Business Enterprises, which achieve fair presentation in the meantime; and (2) designing, implementing and maintaining necessary internal control to avoid material misstatement resulting from fraudulence or mistakes.

2. Responsibility of CPAs

Our responsibility is to provide audit opinions on the financial statements based on our audit. We have performed the audit in accordance with the China’s Independent Auditing Standards.. The standards contained thereof require that we shall abide by professional ethics code for CPAs of China, plan and perform the audit to obtain reasonable assurance about whether or not the financial statements are free from material misstatement.

— 182 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Our audit work includes implementing the audit procedure to obtain audit evidence relating to the amounts and disclosure of the financial statements. The audit procedure selected depends on the judgment of the CPAs, including assessment of the risk of material misstatement resulting from fraudulence or mistakes. While engaging in risk evaluation, CPAs took into consideration the internal control related to preparing and fairly presenting financial statements, with the purpose of designing proper audit procedure, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. The audit also includes assessing the appropriateness of accounting principles used and the rationality of the accounting estimates made by the management, as well as evaluating the overall financial statement presentation.

We believe the audit evidence we obtained is adequate and appropriate and provides a basis for us to give our opinions.

3. Auditors’ opinions

In our opinion, the financial statements of Letv are, in all material respects, prepared in accordance with Accounting Standards for Business Enterprises, and fairly present the consolidated and parent company’s financial position of Letv as at December 31st, 2015 as well as the consolidated and parent company’s operating results and cash flow in 2015.

II. Financial statements

The unit in the notes to financial statements is RMB.

1. Consolidated balance sheet

December 31st, 2015

Prepared by: Leshi Internet Information & Technology Corp (Beijing)

		Unit: RMB
Items	Ending balance	Opening balance
Current assets:
Monetary funds	2,729,778,115.14	499,850,156.29
Settlement provision
Lendings
Financial assets measured at fair value with changes
stated as current gains/losses
Derivative financial assets
Notes receivable	909,130,941.24	11,337,263.64
Accounts receivable	3,359,683,070.34	1,892,606,343.05
Advance payment	518,179,809.89	298,718,272.52
Premiums receivable

— 183 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Reinsurance accounts receivable Reinsurance contract reserves receivable Interests receivable Dividends receivable Other receivables Financial assets held under resale agreements Inventories Assets classified as held for sale Non-current assets maturing with one year Other current assets Total current assets Non-current assets: Issue of loans and advances Available-for-sale financial assets Held-to-maturity investments Long-term receivables Long-term equity investment Investment real estate Fixed assets Construction in progress Project materials Disposal of fixed assets Production-type biological assets Oil and gas assets Intangible assets Development expenses Goodwill Long-term expenses to be amortized Deferred tax assets Other non-current assets Total non-current assets Total assets Current liabilities: Short-term loans Loans from the central bank Deposits accepted and deposits from banks and other financial institutions Placements from banks and other financial institutions	Ending balance 165,620,378.93 1,138,787,425.07 290,616,467.33 9,111,796,207.94 159,529,787.23 10,045,254.04 629,348,189.66 4,879,832,445.98 424,155,254.98 747,585,265.47 1,082,073.15 507,251,454.37 511,528,626.09 7,870,358,350.97 16,982,154,558.91 1,735,000,000.00	Opening balance 75,839,386.69 733,526,978.69 73,000,000.00
		3,584,878,400.88
		20,000,000.00 343,015,085.10 3,338,541,906.06 388,056,048.72 747,585,265.47 1,930,683.00 196,218,582.19 230,797,275.71
		5,266,144,846.25
		8,851,023,247.13
		1,388,000,000.00

— 184 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Financial liabilities measured at fair value with changes stated as current gains/losses Derivative financial liabilities Notes payable Accounts payable Advance receipts Financial assets sold for repurchase Fees and commissions payable Remuneration payable to employees Taxes payable Interests payable Dividends payable Other payables Reinsurance accounts payable Insurance contract reserve Funds from securities trading agency Funds from securities underwriting agency Liabilities classified as held for sale Non-current liabilities maturing within one year Other current liabilities Total current liabilities Non-current liabilities: Long-term loans Bonds payable Including: Preferred shares Perpetual bonds Long-term payables Long-term remuneration payable to employees Special payables Accrued liability Deferred earnings Deferred tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Owners’ equity: Share capital Other equity instruments Including: Preferred shares	Ending balance 3,230,743,322.86 1,733,076,250.81 5,157,677.11 577,549,772.36 52,645,206.38 19,370,692.86 98,975,701.57 7,452,518,623.95 300,000,000.00 1,900,558,350.60 34,559,489.87 557,580.45 6,489,861.73 3,472,336,372.62 5,714,501,655.27 13,167,020,279.22 1,856,015,158.00	Opening balance 20,000,000.00 1,605,289,561.49 323,395,607.04 3,009,132.52 409,757,631.22 15,200,173.46 11,118,812.41 27,349,670.91 401,148,171.00 199,606,666.61
		4,403,875,426.66
		81,873,823.68 6,231,939.27 1,015,568,661.50
		1,103,674,424.45
		5,507,549,851.11
		841,190,063.00

— 185 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Perpetual bonds Capital reserve Less: Treasury shares Other consolidated revenue Special reserves Surplus reserve General risk reserves Undistributed profit Total equity attributable to owners of the parent company Minority interests Total owners’ equity Total liabilities and owners’ equity Legal representative: Jia Yueting Person in charge of accounting: Yang Lijie Officer-in-charge of accounting institution: Li Yongchao	Ending balance 549,148,989.30 27,837,143.24 179,165,369.15 1,315,492,772.28 3,927,659,431.97 -112,525,152.28 3,815,134,279.69 16,982,154,558.91	Opening balance 1,366,018,527.78 -706,643.49 116,965,360.22 843,360,350.78
		3,166,827,658.29 176,645,737.73
		3,343,473,396.02
		8,851,023,247.13

2. Balance sheet of the parent company

Items Current assets: Monetary funds Financial assets measured at fair value with changes stated as current gains/losses Derivative financial assets Notes receivable Accounts receivable Advance payment Interests receivable Dividends receivable Other receivables Inventories Assets classified as held for sale Non-current assets maturing with one year Other current assets Total current assets	Ending balance 1,629,291,968.20 7,099,028.00 3,541,546,789.55 372,777,659.68 2,631,657,845.10 32,492,194.03 41,253,662.61 8,256,119,147.17	Unit: RMB Opening balance 327,420,790.13 1,900,000.00 1,549,475,005.40 91,823,763.77 1,616,940,809.06 74,413,203.57 23,000,000.00
		3,684,973,571.93

— 186 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Non-current assets: Available-for-sale financial assets Held-to-maturity investments Long-term receivables Long-term equity investment Investment real estate Fixed assets Construction in progress Project materials Disposal of fixed assets Production-type biological assets Oil and gas assets Intangible assets Development expenses Goodwill Long-term expenses to be amortized Deferred tax assets Other non-current assets Total non-current assets Total assets Current liabilities: Short-term loans Financial liabilities measured at fair value with changes stated as current gains/losses Derivative financial liabilities Notes payable Accounts payable Advance receipts Remuneration payable to employees Taxes payable Interests payable Dividends payable Other payables Liabilities classified as held for sale Non-current liabilities maturing within one year Other current liabilities Total current liabilities	Ending balance 66,581,116.97 3,139,360,151.17 204,245,182.49 1,352,753,246.56 87,258,168.47 26,620,486.68 250,392,318.01 5,127,210,670.35 13,383,329,817.52 1,385,000,000.00 250,000,000.00 690,995,335.51 52,545,768.17 1,664,625.79 400,298,017.46 52,645,206.38 505,825,659.72 98,975,701.57 3,437,950,314.60	Opening balance 20,000,000.00 2,424,070,405.43 322,263,096.32 1,059,915,451.57 181,733,554.42 10,589,900.42 92,956,947.41
		4,111,529,355.57
		7,796,502,927.50
		1,168,000,000.00 220,000,000.00 580,280,544.94 14,846,291.17 1,106,374.85 270,378,240.83 15,200,173.46 11,118,812.41 448,692,998.42 401,148,171.00 199,606,666.61
		3,330,378,273.69

— 187 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Ending balance Opening balance Non-current liabilities: Long-term loans 300,000,000.00 Bonds payable 1,900,558,350.60 Including: Preferred shares Perpetual bonds Long-term payables 34,559,489.87 81,873,823.68 Long-term remuneration payable to employees Special payables Accrued liability Deferred earnings 557,580.45 6,231,939.27 Deferred tax liabilities 1,401,579.29 Other non-current liabilities 3,472,336,372.62 1,015,568,661.50 Total non-current liabilities 5,709,413,372.83 1,103,674,424.45 Total liabilities 9,147,363,687.43 4,434,052,698.14 Owners’ equity: Share capital 1,856,015,158.00 841,190,063.00 Other equity instruments Including: Preferred shares Perpetual bonds Capital reserve 725,301,393.37 1,449,915,934.00 Less: Treasury shares Other consolidated revenue Special reserves Surplus reserve 179,165,369.15 116,965,360.22 Undistributed profit 1,475,484,209.57 954,378,872.14 Total owners’ equity 4,235,966,130.09 3,362,450,229.36 Total liabilities and owners’ equity 13,383,329,817.52 7,796,502,927.50

— 188 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Consolidated income statement

				Unit: RMB
			Amount incurred	Amount incurred
			in the current	in the previous
Items			period	period
I.	Total operating revenue		13,016,725,124.12	6,818,938,622.38
		Including: Operating revenue	13,016,725,124.12	6,818,938,622.38
		Interest revenue
		Earned premium
		Fee and commission revenue
II.	Total operating cost		13,026,051,728.75	6,771,077,207.46
		Including: Operating cost	11,112,009,123.84	5,828,133,468.42
		Interest expenses
		Fee and commission expense
		Surrender value
		Net amount of compensation payout
		Net amount of reserves for insurance contract
		Policy dividend payment
		Reinsurance cost
		Business taxes and surcharges	94,680,829.11	56,848,870.42
		Sales expenses	1,040,736,778.35	489,035,465.49
		Administrative expenses	309,492,095.22	175,454,652.60
		Financial expenses	348,979,599.08	167,915,495.78
		Asset impairment loss	120,153,303.15	53,689,254.75
		Plus: Revenue from change in fair value
		(“-” for loss)
		Investment revenue (“-” for loss)	78,749,437.60	5,038.44
		Including: Revenue from investment in associated
		enterprises and joint ventures	45,254.04	-318,733.87
		Exchange revenue (“-” for loss)
III.	Operating profit (“-” for loss)		69,422,832.97	47,866,453.36
		Plus: Non-operating revenue	44,987,912.96	27,556,349.09
		Including: Gain from disposal of non-current
		assets
		Less: Non-operating expense	40,241,523.84	2,523,697.61
		Including: Loss from disposal of non-current
		assets	37,634,806.94	474,357.08
IV.	Total profit (“-” for total loss)		74,169,222.09	72,899,104.84
		Less: Income tax expense	-142,947,603.47	-55,897,456.04
V.	Net	profit (“-” for net loss)	217,116,825.56	128,796,560.88
		Net profit attributable to owners of the parent
		company	573,027,173.33	364,029,509.12
		Gains/losses of minority shareholders	-355,910,347.77	-235,232,948.24
VI.	After-tax net amount of other consolidated revenue		28,543,786.73	498,719.46
		After-tax net amount of other consolidated
		revenue attributable to owners of the parent
		company	28,543,786.73	498,719.46

— 189 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		Amount incurred	Amount incurred
		in the current	in the previous
Items		period	period
(I)	Other consolidated revenue that cannot be
	reclassified into profits/losses
	1. Changes arising from re-measurement of net
	liabilities or net assets of defined benefit
	plan
	2. Share in other consolidated revenue of the
	invested entity that cannot be reclassified
	into profits/losses under the equity method
(II) Other consolidated revenue that will be
	reclassified into profits/losses	28,543,786.73	498,719.46
	1. Share in other consolidated revenue of the
	invested entity that will be reclassified into
	profits/losses under the equity method
	2. Gains/losses from change in fair value of
	available-for-sale financial assets	5,072,950.59
	3. Held-to-maturity investment reclassified as
	gains/losses from available-for-sale
	financial assets
	4. Operational factors of cash flow hedging
	gains/losses
	5. Translation difference of foreign-currency
	financial statements	23,470,836.14	498,719.46
	6. Others
After-tax net amount of other consolidated revenue
attributable to minority shareholders
VII.Total consolidated revenue		245,660,612.29	129,295,280.34
Total consolidated revenue attributable to owners of
the parent company		601,570,960.06	364,528,228.58
Total consolidated revenue attributable to minority
shareholders		-355,910,347.77	-235,232,948.24
VIII.Earnings per share:
(I) Basic earnings per share		0.31	0.20
(II) Diluted earnings per share		0.30	0.20

For merger of enterprises under the same control in the current period, net profit realized by the merged party before merger was RMB0.00; net profit realized by the merged party in the last period was RMB0.00.

Legal representative: Jia Yueting Person in charge of accounting: Yang Lijie Officer-in-charge of accounting institution: Li Yongchao

— 190 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Income statement of the parent company

				Unit: RMB
			Amount incurred	Amount incurred
			in the current	in the previous
Items			period	period
I.	Operating revenue		3,965,860,728.81	2,359,676,820.96
	Less: Operating cost		2,210,010,104.53	1,254,089,053.34
		Business taxes and surcharges	89,020,874.72	50,406,627.06
		Sales expenses	430,772,864.75	164,710,108.65
		Administrative expenses	193,262,730.00	123,558,298.41
		Financial expenses	251,449,398.99	144,816,381.94
		Asset impairment loss	100,302,254.70	35,318,475.77
	Plus: Revenue from change in fair value (“-” for
		loss)
		Investment revenue (“-” for loss)	14,210,938.15	-669,853.87
		Including: Revenue from investment in
		associated enterprises and joint
		ventures	45,254.04	-318,733.87
II.	Operating profit (“-” for loss)		705,253,439.27	586,108,021.92
	Plus: Non-operating revenue		21,878,100.00	13,653,440.00
	Including: Gain from disposal of non-current assets
	Less: Non-operating expense		32,021,151.37	38,921.26
	Including: Loss from disposal of non-current assets
III.	Total profit (“-” for total loss)		695,110,387.90	599,722,540.66
	Less: Income tax expense		73,110,298.64	66,122,516.77
IV.	Net profit (“-” for net loss)		622,000,089.26	533,600,023.89
V.	After-tax net amount of other consolidated revenue
	(I)	Other consolidated revenue that cannot be
		reclassified into profits/losses
		1. Changes arising from re-measurement of
		net liabilities or net assets of defined
		benefit plan
		2. Share in other consolidated revenue of
		the invested entity that cannot be
		reclassified into profits/losses under the
		equity method
	(II)	Other consolidated revenue that will be
		reclassified into profits/losses

1. Share in other consolidated revenue of the invested entity that will be reclassified into profits/losses under the equity method

— 191 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

		Amount incurred	Amount incurred
		in the current	in the previous
Items		period	period
	2. Gains/losses from change in fair value of
	available-for-sale financial assets
	3. Held-to-maturity investment reclassified
	as gains/losses from available-for-sale
	financial assets
	4. Operational factors of cash flow hedging
	gains/losses
	5. Translation difference of foreign-currency
	financial statements
	6. Others
VI.	Total consolidated revenue	622,000,089.26	533,600,023.89
VII.	Earnings per share:
	(I) Basic earnings per share	0.34	0.30
	(II) Diluted earnings per share	0.33	0.30
5.	Consolidated cash flow statement
			Unit: RMB
		Amount incurred	Amount incurred
		in the current	in the previous
Items		period	period
I.	Cash flows from operating activities:
	Cash received from sales of goods and provision
	of labor service	10,044,744,599.42	5,829,074,513.65
	Net increase in deposits from customers and banks
	and other financial institutions
	Net increase in loans from the central bank
	Net increase in placements from other financial
	institutions
	Cash premiums received from original insurance
	contracts
	Net cash received from reinsurance business
	Net increase in deposits from policyholders and
	investment funds
	Net increase from disposal of financial assets
	measured at fair value with changes stated as
	current gains/losses
	Cash received from interests, fees and commissions
	Net increase in placements from banks and other
	financial institutions

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

	Amount incurred	Amount incurred
	in the current	in the previous
Items	period	period
Net increase in repurchase business capital
Tax refunds received	1,127,498.50	186,020.67
Other cash received relating to operating activities	113,285,059.83	139,137,661.24
Subtotal of cash inflows from operating activities	10,159,157,157.75	5,968,398,195.56
Cash paid for purchase of goods and acceptance of
labor service	7,562,564,647.71	4,813,753,614.62
Net increase in loans and advances to customers
Net increase in deposits with central bank and other
financial institutions
Cash paid for original insurance contract claims
Cash paid for interests, fees and commissions
Cash paid for policy dividends
Cash paid to and for employees	595,428,336.05	354,345,989.41
Taxes paid	257,620,152.08	144,100,574.77
Other cash paid relating to operating activities	867,842,145.45	422,015,282.80
Subtotal of cash outflows from operating activities	9,283,455,281.29	5,734,215,461.60
Net cash flows from operating activities	875,701,876.46	234,182,733.96
II. Cash flows from investing activities:
Cash received from taking back investments	56,556,521.11	76,548,880.00
Cash received from investment revenue		355,399.71
Net cash received from disposal of fixed assets,
intangible assets and other long-term assets	4,350.68	2,687.17
Net cash received from disposal of subsidiaries and
other operating entities
Other cash received relating to investing activities
Subtotal of cash inflows from investing activities	56,560,871.79	76,906,966.88
Cash paid for purchase and construction of fixed
assets, intangible assets and other long-term assets	2,809,349,736.56	1,273,869,838.35
Cash paid for investments	142,228,000.00	89,506,119.00
Net increase in pledge loans
Net cash paid for acquisition of subsidiaries and
other operating entities		239,204,736.97
Other cash paid relating to investing activities	89,733,291.83	3,912.09
Subtotal of cash outflows from investing activities	3,041,311,028.39	1,602,584,606.41
Net cash flows from investing activities	-2,984,750,156.60	-1,525,677,639.53
III. Cash flows from financing activities:
Cash received from introducing investment	47,910,284.84	420,397,521.88
Including: Cash received by subsidiaries from
investments of minority shareholder

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

		Amount incurred	Amount incurred
		in the current	in the previous
Items		period	period
	Cash received for obtaining loans	9,046,574,441.04	2,660,600,000.00
	Cash received from issue of bonds	1,895,260,000.00
	Other cash received relating to financing activities	400,933,888.89
Subtotal of cash inflows from financing activities		11,390,678,614.77	3,080,997,521.88
	Cash paid for repayment of debts	6,746,926,238.50	1,738,406,600.96
	Cash paid for distribution of dividends and profit or
	repayment for interests	144,106,767.40	161,794,712.42
	Including: Dividend and profit paid by subsidiaries
	to minority shareholders
	Other cash paid relating to financing activities	134,296,501.87	27,529,193.63
Subtotal of cash outflows from financing activities		7,025,329,507.77	1,927,730,507.01
Net	cash flows from financing activities	4,365,349,107.00	1,153,267,014.87
**IV. **	Effect of exchange rate change on cash and cash
	equivalents	11,128,692.65	-141,618.96
V.	Net increase in cash and cash equivalent	2,267,429,519.51	-138,369,509.66
	Plus: Opening balance of cash and cash equivalents	447,348,595.63	585,718,105.29
**VI. **	Ending balance of cash and cash equivalents	2,714,778,115.14	447,348,595.63

1. Cash flow statement of the parent company

			Unit: RMB
		Amount incurred	Amount incurred
		in the current	in the previous
Items		period	period
I.	Cash flows from operating activities:
	Cash received from sales of goods and provision of
	labor service	2,307,191,168.24	1,485,574,203.04
	Tax refunds received
	Other cash received relating to operating activities	363,569,210.08	1,242,535,799.63
Subtotal of cash inflows from operating activities		2,670,760,378.32	2,728,110,002.67
	Cash paid for purchase of goods and acceptance of
	labor service	1,095,175,718.00	550,825,956.11
	Cash paid to and for employees	384,955,488.39	254,698,072.03
	Taxes paid	182,440,646.31	116,933,647.56
	Other cash paid relating to operating activities	1,693,533,421.61	1,471,569,087.21
Subtotal of cash outflows from operating activities		3,356,105,274.31	2,394,026,762.91
Net	cash flows from operating activities	-685,344,895.99	334,083,239.76
**II. **	Cash flows from investing activities:

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

		Amount incurred	Amount incurred
		in the current	in the previous
Items		period	period
	Cash received from taking back investments	6,556,521.11	4,048,880.00
	Cash received from investment revenue
	Net cash received from disposal of fixed assets,
	intangible assets and other long-term assets	4,350.68	2,469.81
	Net cash received from disposal of subsidiaries and
	other operating entities
	Other cash received relating to investing activities
Subtotal of cash inflows from investing activities		6,560,871.79	4,051,349.81
	Cash paid for purchase and construction of fixed
	assets, intangible assets and other long-term assets	1,428,484,234.70	553,067,747.98
	Cash paid for investments	356,405,273.05	514,844,017.00
	Net cash paid for acquisition of subsidiaries and
	other operating entities		270,000,000.00
	Other cash paid relating to investing activities		3,912.09
Subtotal of cash outflows from investing activities		1,784,889,507.75	1,337,915,677.07
Net	cash flows from investing activities	-1,778,328,635.96	-1,333,864,327.26
III.	Cash flows from financing activities:
	Cash received from introducing investment	29,910,284.84	320,591,396.76
	Cash received for obtaining loans	9,046,574,441.04	2,610,600,000.00
	Cash received from issue of bonds	1,895,260,000.00
	Other cash received relating to financing activities	95,348,888.89
	Subtotal of cash inflows from financing activities	11,067,093,614.77	2,931,191,396.76
	Cash paid for repayment of debts	6,726,926,238.50	1,678,406,600.96
	Cash paid for distribution of dividends and profit or
	repayment for interests	143,702,478.51	160,102,423.53
	Other cash paid relating to financing activities	393,418,627.08	27,529,193.63
Subtotal of cash outflows from financing activities		7,264,047,344.09	1,866,038,218.12
Net	cash flows from financing activities	3,803,046,270.68	1,065,153,178.64
**IV. **	Effect of exchange rate change on cash and cash
	equivalents
V.	Net increase in cash and cash equivalents	1,339,372,738.73	65,372,091.14
	Plus: Opening balance of cash and cash equivalents	274,919,229.47	209,547,138.33
**VI. **	Ending balance of cash and cash equivalents	1,614,291,968.20	274,919,229.47

— 195 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Unit: RMB				Minority Total	interests owners’ equity	176,645,737.73 3,343,473,396.02										176,645,737.73 3,343,473,396.02			-289,170,890.01 471,660,883.67	-355,910,347.77 245,660,612.29		66,739,457.76 146,561,931.39			18,000,000.00 42,513,264.84						55,309,208.79	48,739,457.76 48,739,457.76	-38,694,742.90						-38,694,742.90																	118,133,082.89		-112,525,152.28 3,815,134,279.69
				Undistributed	profit	843,360,350.78										843,360,350.78			472,132,421.50	573,027,173.33													-100,894,751.83		-62,200,008.93				-38,694,742.90																			1,315,492,772.28
				General	risk reserves
				Surplus	reserve	116,965,360.22										116,965,360.22			62,200,008.93														62,200,008.93		62,200,008.93																							179,165,369.15
				Special	reserves
	Current period	Equity attributable to owners of the parent company	Other	Capital Less: Treasury consolidate	reserve shares revenue	1,366,018,527.78 -706,643.49										1,366,018,527.78 -706,643.49			-816,869,538.48 28,543,786.73	28,543,786.73		74,425,453.63			24,513,264.84						49,912,188.79											-1,009,428,075.00			-1,009,428,075.00											118,133,082.89		549,148,989.30 27,837,143.24
					Others
			Other equity instruments		Preferred shares Perpetual bonds
					Share capital	841,190,063.00										841,190,063.00			1,014,825,095.00			5,397,020.00									5,397,020.00											1,009,428,075.00			1,009,428,075.00													1,856,015,158.00
					Items	I. Ending balance of last year	Plus: Changes in accounting		policies	Correction of previous errors	Merger of enterprise under the	same control	Others	II. Opening balance of this		year	III. Increases/decreases of the	current period	(“-” for decrease)	(I) Total consolidated revenue	(II) Owners’ capital injected	and reduced	1. Ordinary shares invested by		shareholders	2. Capital invested by holders		of other equity instruments	3. Amounts of share-based	payments included in	owners’ equity	4. Others	(III) Profit distribution	1. Withdrawal of surplus	reserves	2. Withdrawal of general risk	reserves	3. Distribution to owners (or	shareholders)	4. Others	(IV) Internal carryover of	owners’ equity	1. Transfer of capital reserves	into paid-in capital (or share	capital)	2. Transfer of surplus reserves	into paid-in capital (or share	capital)	3. Surplus reserves for making	up losses	4. Others	(V) Special reserves	1. Withdrawal in the current	period	2. Use in the current period	(VI) Others	IV. Ending balance of the	current period

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APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Unit: RMB				Minority Total owners’	interests equity	479,985,606.02 2,080,024,469.99										479,985,606.02 2,080,024,469.99				-303,339,868.29 1,263,448,926.03	-235,232,948.24 128,796,560.88		-68,106,920.05 1,161,001,734.93			-82,678,035.18 1,169,371,104.37							14,571,115.13 103,603,698.68	-111,973,068.12	-26,349,369.78						-26,349,369.78																			176,645,737.73 3,343,473,396.02
				Undistributed	profit	559,040,213.83										559,040,213.83				284,320,136.95	364,029,509.12														-79,709,372.17		-53,360,002.39				-26,349,369.78																			843,360,350.78
				General	risk reserves
				Surplus	reserve	63,605,357.83										63,605,357.83				53,360,002.39															53,360,002.39		53,360,002.39																							116,965,360.22
				Special	reserves
	Previous period	Equity attributable to owners of the parent company	Other	Capital Less: Treasury consolidated	reserve shares revenue	179,633,637.80 -706,643.49										179,633,637.80 -706,643.49				1,186,384,889.98			1,186,384,889.98			1,209,325,374.55							89,032,583.55	-111,973,068.12																										1,366,018,527.78 -706,643.49
					Others
				Other equity instruments	Share capital Preferred shares Perpetual bonds	798,466,298.00										798,466,298.00				42,723,765.00			42,723,765.00			42,723,765.00																																		841,190,063.00
					Items	I. Ending balance of last year	Plus: Changes in accounting		policies	Correction of previous errors	Merger of enterprise under the	same control	Others	II. Opening balance of this		year	III. Increases/decreases of the	current period (“-” for		decrease)	(I) Total consolidated revenue	(II) Owners’ capital injected	and reduced	1. Ordinary shares invested by		shareholders	2. Capital invested by holders		of other equity	instruments	3. Amounts of share-based	payments included in	owners’ equity	4. Others	(III) Profit distribution	1. Withdrawal of surplus	reserves	2. Withdrawal of general risk	reserves	3. Distribution to owners (or	shareholders)	4. Others	(IV) Internal carryover of	owners’ equity	1. Transfer of capital reserves	into paid-in capital (or	share capital)	2. Transfer of surplus reserves	into paid-in capital (or	share capital)	3. Surplus reserves for making	up losses	4. Others	(V) Special reserves	1. Withdrawal in the current	period	2. Use in the current period	(VI) Others	IV. Ending balance of the	current period

— 197 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Unit: RMB			Undistributed Total owners’	Surplus reserve profit equity	116,965,360.22 954,378,872.14 3,362,450,229.36								116,965,360.22 954,378,872.14 3,362,450,229.36				62,200,008.93 521,105,337.43 873,515,900.73		622,000,089.26 622,000,089.26		172,077,471.48			24,513,264.84							61,832,497.96	85,731,708.68	62,200,008.93 -100,894,751.83 -38,694,742.90		62,200,008.93 -62,200,008.93		-38,694,742.90 -38,694,742.90																	118,133,082.89		179,165,369.15 1,475,484,209.57 4,235,966,130.09
				Special reserves
		Other	consolidated	revenue
	Current period		Less: Treasury	shares
				Capital reserve	1,449,915,934.00								1,449,915,934.00				-724,614,540.63				166,680,451.48			24,513,264.84							56,435,477.96	85,731,708.68								-1,009,428,075.00			-1,009,428,075.00											118,133,082.89		725,301,393.37
				Others
		Other equity instruments	Perpetual	bonds
			Preferred	shares
			Share	capital	841,190,063.00								841,190,063.00				1,014,825,095.00				5,397,020.00										5,397,020.00									1,009,428,075.00			1,009,428,075.00													1,856,015,158.00
				Items	I. Ending balance of last year	Plus: Changes in accounting		policies	Correction of previous errors	Others	II. Opening balance of this		year	III. Increases/decreases of the	current period (“-” for		decrease)	(I) Total consolidated	revenue	(II) Owners’ capital injected	and reduced	1. Ordinary shares invested		by shareholders	2. Capital invested by		holders of other equity	instruments	3. Amounts of share-based	payments included in	owners’ equity	4. Others	(III) Profit distribution	1. Withdrawal of surplus	reserves	2. Distribution to owners (or	shareholders)	3. Others	(IV) Internal carryover of	owners’ equity	1. Transfer of capital	reserves into paid-in	capital (or share capital)	2. Transfer of surplus	reserves into paid-in	capital (or share capital)	3. Surplus reserves for	making up losses	4. Others	(V) Special reserves	1. Withdrawal in the current	period	2. Use in the current period	(VI) Others	IV. Ending balance of the	current period

— 198 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Unit: RMB			Undistributed Total owners’	profit equity	500,488,220.42 1,499,546,737.02								500,488,220.42 1,499,546,737.02				453,890,651.72 1,862,903,492.34		533,600,023.89 533,600,023.89		1,355,652,838.23			1,252,049,139.55							103,603,698.68		-79,709,372.17 -26,349,369.78		-53,360,002.39		-26,349,369.78 -26,349,369.78																				954,378,872.14 3,362,450,229.36
				Surplus reserve	63,605,357.83								63,605,357.83				53,360,002.39																53,360,002.39		53,360,002.39																						116,965,360.22
				Special reserves
		Other	consolidated	revenue
	Previous period		Less: Treasury	shares
				Capital reserve	136,986,860.77								136,986,860.77				1,312,929,073.23				1,312,929,073.23			1,209,325,374.55							103,603,698.68																										1,449,915,934.00
				Others
			Other equity instruments	Share capital Preferred shares Perpetual bonds	798,466,298.00								798,466,298.00				42,723,765.00				42,723,765.00			42,723,765.00																																	841,190,063.00
				Items	I. Ending balance of last year	Plus: Changes in accounting		policies	Correction of previous errors	Others	II. Opening balance of this		year	III. Increases/decreases of the	current period (“-” for		decrease)	(I) Total consolidated	revenue	(II) Owners’ capital injected	and reduced	1. Ordinary shares invested		by shareholders	2. Capital invested by		holders of other equity	instruments	3. Amounts of share-based	payments included in	owners’ equity	4. Others	(III) Profit distribution	1. Withdrawal of surplus	reserves	2. Distribution to owners (or	shareholders)	3. Others	(IV) Internal carryover of	owners’ equity	1. Transfer of capital	reserves into paid-in	capital (or share capital)	2. Transfer of surplus	reserves into paid-in	capital (or share capital)	3. Surplus reserves for	making up losses	4. Others	(V) Special reserves	1. Withdrawal in the current	period	2. Use in the current period		(VI) Others	IV. Ending balance of the	current period

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APPENDIX II

III. Basic information of the Company

Leshi Internet Information & Technology Corp (Beijing) (hereinafter referred to as the Company or Letv, collectively referred to as the Group when the subsidiaries are included) was formerly known as Beijing Letv Star Information Technology Co., Ltd., which was established in Beijing upon approval by Beijing Administration for Industry and Commerce in November 2004. At the time of establishment, the Company’s initial registered capital was RMB50 million, in which Jia Yueting (a natural person) contributed RMB45 million, accounting for 90.00% of the Company’s registered capital, Jia Yuefang (a natural person) contributed RMB100,000, accounting for 0.20% of the Company’s registered capital and Beijing Xbell Communication Technology Co., Ltd. invested RMB4.9 million, accounting for 9.80% of the Company’s registered capital. In August 2010, the Company, upon approval by China Securities Regulatory Commission (CSRC), issued 25 million RMB common stocks to the public for the first time and was listed in Shenzhen Stock Exchange, with stock code of 300104. After the public offering, share distribution, transfer and allotment and exercise of stock options, the Company’s registered capital was RMB1,856,015,158 at the end of the reporting period.

The Company’s unified social credibility code: 911100007693890511. The Company’s address: Room No. 6184, Floor 6, Building 19, No. 68, Xueyuan South Road, Haidian District, Beijing City; legal representative: Jia Yueting

Business scope of the Company: Internet information services (including issuance of Internet advertisements); information services in the second-class value-added telecommunication services (excluding fixed-line telephone information services and Internet information services); production and publication of cartoons, features and TV entertainment programs, excluding broadcasting and TV programs such as political news, similar features and special columns (the broadcasting and TV program and television drama production license is valid until December 28th, 2017); development of computer hardware and software; computer system services; sales of computer hardware, software and auxiliary equipment, clothing, shoes and hats, leather products, textiles, daily necessities, toys, stationery, sports goods, household electrical appliances, jewelry, cars and auto parts; Internet cultural activities. (Internet cultural activities and any project that needs to be approved according to laws can only be carried out according to the approved items after approval by relevant authorities.)

The Company’s main business is to provide network video services, network terminal equipment and value-added services of video platform.

As of December 31st, 2015, there were 13 subsidiaries covered in the Company’s consolidated financial statements: LeTV Information Technology (Tianjin) Co., Ltd., Beijing LeTV Streaming Media Advertising Co., Ltd., Letv Information Technology (Hong Kong) Co., Ltd., LeTV Information Technology (Shanghai) Co., Ltd., Leshi Zhixin Electronic Technology (Tianjin) Limited, LeTV Cultural Development (Beijing) Co., Ltd., LeTV New Media Culture (Tianjin) Co., Ltd., Dongyang LeTV Flower Film & TV Co., Ltd., LeCloud Computing Co., Ltd., LeTV E-commerce (Beijing) Co., Ltd., Khorgos Lehai Culture Media Co., Ltd., LeTV Fortune (Beijing) Information Technology Co., Ltd. and Lexiang Holdings Co., Ltd. As the shareholding percentage was changed in March 2015 and LeTV Sports Culture Development (Beijing) Co., Ltd. was no longer under control, it was not included in the consolidation scope at the end of the period.

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Refer to “VIII. Change of the consolidation scope” and “IX. Rights and interests in other equities” of the notes for details.

IV. Basis for preparation offinancial statements

1. Basis for preparation

The Group prepared the financial statements on the basis of continuous operation and according to the transactions and events actually incurred, the Accounting Standards for Business Enterprises and relevant provisions issued by the Ministry of Finance, as well as the accounting policies and accounting estimates in “V. Important accounting policies and accounting estimates” of the notes.

2. Continuous operation

The Group has evaluated the continuous operation ability in the 12 months from the end of the reporting period and has not found any material matter that affects the Company’s continuous operation ability. Therefore, the Group deems it reasonable for it to prepare the financial statements based on continuous operation.

V. Important accounting policies and accounting estimates

Notes for specific accounting policies and accounting estimates:

The following important accounting policies and accounting estimates of the Company are determined according to the Accounting Standards for Business Enterprises. Businesses not mentioned should be conducted according to the relevant accounting policies in the Accounting Standards for Business Enterprises.

1. Statement of compliance with accounting standards for business enterprises

The financial statements prepared by the Group comply with the Accounting Standards for Business Enterprises and give a true and complete view of the financial position, operating results and cash flow of the Group.

2. Accounting period

The Group’s accounting period is from January 1st to December 31st of each Gregorian calendar year.

3. Operating cycle

The Group’s operating cycle is one year.

4. Recording currency

The Group adopts RMB as the recording currency.

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

5. Accounting for merger of enterprises under the same control and not under the same control

The assets and liabilities that the Group obtains as a merging party in the merger of enterprises under the same control should be measured on the basis of the book value of the merged party in the consolidated statements of the ultimate controller on the date of merger. The difference between the book value of net assets obtained and the book value of the paid consideration should be used to adjust capital reserve. If the capital reserve is insufficient for writedown, the retained earnings should be adjusted.

Identifiable assets or liabilities and contingent liabilities of the acquiree obtained from merger of enterprises not under the same control should be measured at fair value on the date of acquisition. Merger cost is the sum of fair value of cash or non-cash assets paid, liabilities issued or undertaken, or equity securities issued by the Group for acquisition of control over the acquiree on the date of acquisition, and various directly related expenses incurred in merger of enterprises (the cost of merger of enterprises achieved in stages through multiple transactions is the sum of cost of each single transaction). If the merger cost is higher than the fair value of the identifiable net assets of the acquiree obtained from merger, the difference should be recognized as goodwill; if the merger cost is lower than the fair value of the identifiable net assets of the acquiree obtained from merger, a review should be first conducted on the fair value of the identifiable net assets and liabilities and contingent liabilities obtained from merger, non-cash assets in consideration or equity securities issued. If, after review, the merger cost is still lower than the fair value of the identifiable net assets of the acquiree obtained from merger, the difference should be stated as non-operating income in the period of merger.

6. Method for preparation of consolidated financial statements

The Group includes all the subsidiaries under control in the scope of consolidated financial statements.

If the accounting policy or the accounting period adopted by any subsidiary differs from that adopted by the Group in preparation of the consolidated financial statements, necessary adjustments should be made to the subsidiary’s financial statements according to the Group’s accounting policy or accounting period.

All material internal transactions, balance of current accounts and unrealized profits in the consolidation scope should be offset in preparation of the consolidated statements. The part not attributable to the parent company in the owners’ equity of the subsidiary, current gains/losses, other consolidated income and the part attributable to minority interests in the total consolidated revenue should be respectively listed under “minority interests, minority losses and gains, other consolidated revenue attributable to minority shareholders and total consolidated revenue attributable to minority shareholders” in the consolidated financial statements.

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For subsidiaries obtained from merger of enterprises under the same control, their operating results and cash flows should be included in the consolidated financial statements at the beginning of the period of merger. If any adjustment is made to relevant items in the financial statements of the previous year when the comparative consolidated financial statements are prepared, the reporting entity formed after consolidation should be deemed as having existed since the ultimate controller begins to exert control.

If the equity of the invested entity under the same control is obtained in stages through multiple transactions, so as to achieve merger of enterprises, in preparation of the consolidated statements, it should be deemed that adjustment has been made in the current state since the ultimate controller begins to exert control. In preparation of the comparative statements, the relevant assets and liabilities of the acquiree should be included in the comparative statements of the Group’s consolidated financial statements and the increased net assets resulting from merger should be used to adjust relevant items under owners’ equity in the comparative statements not earlier than the time when the Group and the acquiree fall under the control of the ultimate controller simultaneously. To avoid repeated calculation of the value of the acquiree’s net assets, the long-term equity investment held by the Group before merger is achieved and the changes in relevant recognized gains/losses, other consolidated revenue and other net assets during the period from the later of the date when the original equity is obtained and the date when the Group and the acquiree finally fall under the control of the same party to the date of acquisition should be used to write down the retained earnings at the beginning of the period and current gains/losses during the period of comparative statements, respectively.

For subsidiaries obtained from merger of enterprises not under the same control, their operating results and cash flows should be included in the consolidated financial statements from the date when the Group obtains the control. In preparation of the consolidated financial statements, the financial statements of the subsidiaries should be adjusted based on the fair value of the identifiable assets, liabilities and contingent liabilities recognized on the date of acquisition.

If the equity of the invested entity not under the same control is obtained in stages through multiple transactions, so as to achieve merger of enterprises, in preparation of the consolidated statements, the equity held in the acquiree before the date of acquisition should be restated at the fair value of the equity on the date of acquisition and the difference between the fair value and the book value thereof should be stated as current investment revenue. Other consolidated revenue stated by equity method relating to the equity held in the acquiree before the date of acquisition and changes in other owners’ equity excluding net gains/losses, other consolidated revenue and distributed profits should be stated as investment profit/loss in the period when the date of acquisition falls, which excludes other consolidated revenue resulting from the invested entity’s restatement of changes in net liabilities or net assets in the defined benefit plan.

If the Group partially disposes of long-term equity investment in its subsidiary without losing its control, in the consolidated financial statements, the difference between the disposal price and the net asset shares continuously calculated as from the date of acquisition or date of merger and held in the subsidiary after disposal of long-term equity investment should be used to adjust capital premium or stock premium. If the capital reserve is insufficient for writedown, the retained earnings should be adjusted.

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If the Group loses control over the invested entity for reasons such as disposal of partial equity investments, in preparation of the consolidated financial statements, the remaining equity should be restated as per its fair value on the date of loss of control. The difference obtained after the sum of the consideration obtained from disposal of equity and the fair value of the remaining equity is subtracted by the net asset share continuously calculated as per the original shareholding percentage as from the date of acquisition or date of merger and to be held in the original subsidiary should be stated as investment profit/loss in the current period of loss of control and be used to write down goodwill. Other consolidated revenue relating to the equity investment of the original subsidiary should be restated as current investment profit/loss at the time of loss of control.

Regarding the Group’s disposal of equity investment in its subsidiary in stages through multiple transactions until loss of control, if the transactions for disposal of equity investment in its subsidiary until loss of control are a package deal, the transactions should be taken as a transaction for disposal of subsidiary and loss of control during accounting. However, the difference between each disposal price before loss of control and net asset share held in the subsidiary after disposal of investment should be recognized as other consolidated revenue in the consolidated financial statements, and stated as current investment profit/loss at the time of loss of control.

7. Classification of joint venture arrangements and accounting for joint operation

The Group’s joint venture arrangements include joint operation and joint venture. Regarding joint operation projects, the Group should recognize the assets and liabilities independently held and undertaken in the capacity of a party to the joint venture in joint operation, recognize the assets held and liabilities undertaken by share, and recognize relevant revenues and expenses independently or by share according to relevant agreements. For asset transaction in which purchase and sale relating to joint operation does not constitute a business, only the part attributable to other participants in the joint operation in the gains/losses resulting from the said transaction should be recognized.

8. Standards for determination of cash and cash equivalents

Cash set out in the cash flow statement of the Group refers to stock cash and deposits that can be used for payment at any time. Cash equivalent set out in the cash flow statement refers to investment that is held for not more than three months, highly mobile, easily convertible into given amount of cash and unlikely to change in value.

9. Foreign currency business and translation of foreign currency statements

(1) Foreign currency transactions

Regarding foreign currency transactions of the Group, the amount in foreign currency should be translated into amount in recording currency as per the spot exchange rate on the transaction date. The monetary accounts in foreign currency on the balance sheet date are translated into RMB accounts as per the spot exchange rate on the balance sheet date, and the translation difference arising therefrom is directly stated as current gain/loss except that the exchange difference arising from the special foreign-currency borrowings for purchase and construction or production of assets eligible for capitalization are disposed of as per the principle of capitalization.

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(2) Translation of foreign currency financial statements

The assets and liabilities in the foreign currency balance sheet should be translated as per the spot exchange rate on the balance sheet date. Owners’ equity items excluding “undistributed profit” should be translated as per the spot exchange rate at the time when the business occurs. The revenue and expense items in the income statement should be translated as per the spot exchange rate on the date when the transaction occurs. The translation difference of the foreign currency statements resulting from the abovementioned translation should be set out under other consolidated revenues. Foreign currency cash flow should be translated as per the spot exchange rate on the date when the cash flow occurs. The effect of exchange rate change on cash should be set out separately in the cash flow statement.

10. Financial instruments

• (1) Financial assets

• 1) Classification, recognition basis and measurement method of financial assets

The Group, according to investment purpose and economic essence, classifies its financial assets as financial assets measured at fair value with changes stated as current gains/losses, held-to-maturity investments, receivables and available-for-sale financial assets.

Financial assets measured at fair value with changes stated as current gains/losses include tradable financial assets and financial assets specified at the time of initial recognition to be measured at fair value with changes stated as current gains/losses. The Group classifies the financial assets that meet one of the following conditions as tradable financial assets: the financial assets are acquired for sale in the near term; the financial assets are a part of the portfolio of identifiable financial instruments subject to centralized management and there is objective evidence showing that the Company has recently adopted short-term profit method for management of the portfolio; the financial assets are derivative instruments, excluding the derivative instruments which are specified as and are derivative instruments of effective hedging instruments, derivative instruments under financial guarantee contracts, and derivative instruments related to the equity instrument investment which is not quoted in the active market and whose fair value cannot be measured reliably, and which should be settled by delivering the equity instrument. The Group specifies the financial instruments which only meet one of the following conditions as financial assets measured at fair value with changes stated as current gains/losses at the time of initial recognition: the specification can remove or obviously reduce inconsistency in recognition or measurement of relevant gains or losses resulting from different bases for measurement of the said financial instruments; the Company’s formal written documents concerning risk management or investment strategies have set out that the financial instrument portfolio is managed and assessed based on fair value and is reported to key management personnel; the financial instruments are hybrid instruments including one or more embedded derivative instruments, unless the embedded derivative instruments have no material effect on the cash flow of the hybrid instruments, or the embedded derivative instruments obviously cannot be split from relevant hybrid instruments; the financial instruments are hybrid instruments including embedded derivative instruments that should be split but cannot be measured separately at the time when they are acquired or on the subsequent balance sheet date. Such financial assets should be measured

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subsequently at fair value. Change in fair value should be stated as gain/loss from change in fair value; interest or cash dividend obtained in the period when the assets are held should be recognized as investment revenue; in disposal, the difference between the fair value and the initially stated amount should be recognized as investment profit/loss, and the gain/loss from change in fair value should be adjusted.

Held-to-maturity investments refer to non-derivative financial assets which have a fixed maturity date and fixed or determinable recovery amount and which the Group has the intent and capacity to hold to maturity. Held-to-maturity investments should be measured subsequently at amortized cost by the actual interest rate method, and all the gains/losses arising from amortization or depreciation and derecognition should be stated as current gains/losses.

Receivables refer to non-derivative financial assets without quotation in the active market but with fixed or determinable recovery amount, and should be measured subsequently at amortized cost by the actual interest rate method, and all the gains/losses arising from amortization or depreciation and derecognition should be stated as current gains/losses.

Available-for-sale financial assets refer to non-derivative financial assets specified at the time of initial recognition to be available for sale and financial assets not classified as other financial assets. In such assets, equity instrument investment which is not quoted in the active market and whose fair value cannot be measured reliably and the derivative financial assets which relate to the equity instrument and should be settled by delivering the equity instrument should be measured subsequently at cost; others which are quoted in the active market or which are not quoted in the active market but whose fair value can be measured reliably should be measured at fair value and the changes in fair value should be stated as other consolidate revenues. Such financial assets are measured subsequently at fair value. Except for impairment loss and exchange gain/loss resulting from foreign currency monetary financial assets, the change in fair value of available-for-sale financial assets should be directly stated as shareholders’ equity. When the financial assets are derecognized, the cumulative amount of changes in fair value originally stated as equity should be restated as current gain/loss. Interest on available-for-sale debt instrument investments as calculated by the actual interest rate method in the period when they are held and the cash dividend relating to available-for-sale equity instrument investments and declared to be issued by the invested entity should be taken as investment revenues and stated as current gains/losses. Equity instrument investments which are not quoted in the active market and whose fair value cannot be measured reliably should be measured by cost.

2) Recognition basis and measurement method of transfer of financial assets

Recognition should be discontinued when a financial asset meets any of the following conditions: ①the contract right to collect the cash flow of the said financial asset terminates; ②the financial asset has been transferred and the Group has transferred almost all the risks and rewards relating to the ownership of the financial asset to the transferee; ③the financial asset has been transferred and the Group has given up control over the financial asset, though it neither transfers nor reserves almost all the risks and rewards relating to the ownership of the financial asset.

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If the enterprise has neither transferred nor reserved almost all the risks and rewards relating to the ownership of a financial asset, and has not given up control over the financial asset, the relevant financial asset should be recognized according to the extent of its continuous involvement in the transferred financial asset, and the relevant liability should be recognized accordingly.

If the transfer of an entire financial asset satisfies the conditions for derecognition, the difference between the book value of the transferred financial asset and the sum of consideration received from the transfer and the cumulative amount of changes in the fair value originally stated as other consolidated revenues should be stated as current gain/loss.

If the transfer of a partial financial asset satisfies the conditions for derecognition, the entire book value of the transferred financial asset should, between the part which has been derecognized and the part which has not been derecognized, be amortized according to their respective relative fair values, and the difference between the sum of consideration received from the transfer and the cumulative amount of changes in the fair value that are originally stated as other consolidated revenues and should be amortized to the part which has been derecognized, and the aforesaid book value amortized should be stated as current gain/loss.

3) Test method and accounting of financial asset impairment

Except for financial assets measured at fair value with changes stated as current gains/losses, the Group checks the book value of other financial assets on the balance sheet date, and withdraws provision for impairment if there is objective evidence for impairment of a certain financial asset.

If any financial asset measured at amortized cost decreases in value, the difference by which the present value is lower than the book value of expected future cash flow (excluding future credit loss not incurred) should be withdrawn as provision for impairment. If there is any objective evidence that the said financial asset has restored to its original value and objectively relates to events happening after the said loss is recognized, the original recognized loss will be restated as current gain/loss.

If any available-for-sale financial asset decreases in value, the cumulative loss arising from decreased fair value originally and directly stated as owners’ equity should be restated as impairment loss. For available-for-sale debt instrument investments whose impairment loss is recognized, if their fair value increases after the period and objectively relates to events happening after the original impairment loss is recognized, the original recognized loss will be restated as current gain/loss. For available-for-sale equity instrument investments whose impairment loss is recognized, increase in their fair value after the period will be directly stated as owners’ equity.

(2) Financial liabilities

• 1) Classification, recognition basis and measurement method of financial liabilities

At the time of initial recognition, financial liabilities of the Group are classified into financial liabilities measured at fair value with changes stated as current gains/losses, and other financial liabilities.

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Financial liabilities measured at fair value with changes stated as current gains/losses include tradable financial liabilities and financial liabilities specified at the time of initial recognition to be measured at fair value with changes stated as current gains/losses. Such financial liabilities are subsequently measured at fair value and the gain or loss arising from change in fair value and the dividend and interest expense relating to the financial liabilities are stated as current gains/losses.

Other financial liabilities are measured subsequently at amortized cost by the actual interest rate method.

• 2) Conditions for derecognition of financial liabilities

If the current obligation of afinancial liability is exempted in part or in whole, the said financial liability or obligation should be derecognized. If the Company signs an agreement with the obligee on substitution of the current financial liability by undertaking a new financial liability and the contract terms on the new financial and current financial liabilities are different substantially, the current financial liability should be derecognized and the new financial liability should be recognized at the same time. If the Company makes any substantial amendment to the contract terms on the current financial liability in part or in whole, the current financial liability or any part thereof should be derecognized, and the financial liability with related terms amended should be recognized as a new financial liability. The difference between the book value of the part derecognized and the consideration paid will be stated as current gain/loss.

(3) Determination method of fair value of financial assets and financial liabilities

The Group measures the fair value of financial assets and financial liabilities at the price in the main market. If there is no main market, the Group measures the fair value of financial assets and financial liabilities at the price in the most favourable market, and adopts the estimation technique applicable at the material time and with sufficient available data and other information support.

11. Receivables

• (1) Receivables large in unit value and subject to separate withdrawal of provision for bad debts

Judgment basis or criteria for A certain receivable of the Group which accounts for more than large unit value 10.00% of the total receivables

• Method for separate The difference by which the present value is lower than book withdrawal of provision for value of the future cash flow will be withdrawn as provision for bad debts of receivables bad debts large in unit value

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• (2) Receivables for which provision for bad debts is withdrawn as per the portfolio of credit risk features

Name of portfolio

Method for withdrawal of provision for bad debts

Portfolio 1 Aging analysis method Portfolio 2 Other methods

Portfolios subject to withdrawal of provision for bad debts by aging analysis method:

• Applicable □ Not Applicable

	Withdrawal	Withdrawal
	percentage of	percentage of
Age	accounts receivable	other receivables
Less than 1 year (inclusive)	3.00%	3.00%
1-2 years	10.00%	10.00%
2-3 years	25.00%	25.00%
3-5 years	50.00%	50.00%
Over 5 years	100.00%	100.00%

Portfolios subject to withdrawal of provision for bad debts by percentage of balance:

• Applicable � Not Applicable

Portfolios subject to withdrawal of provision for bad debts by other methods:

• Applicable □ Not Applicable

Withdrawal Withdrawal percentage of percentage of Name of portfolio accounts receivable other receivables Portfolio 2 0.00% 0.00%

• (3) Receivables not large in unit value but subject to separate withdrawal of provision for bad debts

• Reasons for separate Credit risk is special and calculation by general aging analysis withdrawal of provision for method cannot truly reflect its recoverability bad debts

• Method for withdrawal of provision for bad debts

The difference by which the present value is lower than the book value of the future cash flow will be withdrawn as provision for bad debts

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12. Inventories

Inventories refer to finished products or merchandise held by the Group for sale in the daily operations, or work in progress during production, or materials and supplies to be consumed in production or provision of labour service, including raw materials, consigned finished goods, merchandise inventory and low-value consumables.

The Group’s inventories are measured at actual costs when acquired; actual costs of inventories used or delivered are determined through weighted averaging. Low-value consumables are amortized by lump sum.

The Group conducts stocktaking at least once a year based on perpetual inventory system. Inventory gain/loss is stated as gain/loss of the current year.

Inventories are measured on the balance sheet date by the lower of cost and net realizable value, and the difference by which the cost is higher than the net realizable value will be withdrawn as provision for inventory depreciation and stated as current gain/loss.

Net realizable value of inventories should be determined based on the reliable evidence obtained and consideration of purpose for holding the inventories and influence of events happening after the balance sheet date.

Provision for depreciation of inventory is withdrawn as per single inventory item; for inventories with a large amount and lower unit price, the provision for depreciation is withdrawn by inventory type.

If the influence on writing down inventory value has disappeared on the balance sheet date, the amount written down should be recovered, and restated from the provision for depreciation of inventory withdrawn before and into current gain/loss.

13. Assets held for sale

Not Applicable

14. Long-term equity investment

Long-term equity investment of the Group mainly includes investment in subsidiaries, investment in associated enterprises and investment in joint ventures.

The Group’s judgment basis for joint control is that all the participants or participant portfolios jointly control the arrangement and policies on the activities relating to the arrangement should be subject to unanimous approval by the participants jointly controlling the arrangement.

When the Group directly or through its subsidiaries indirectly holds more than 20% (inclusive) but lower than 50% voting rights of the invested entity, it should be generally deemed that the Group has material influence on the invested entity. If the Group holds less than 20% voting rights of the

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invested entity, whether the Group has material influence on the invested entity should be judged based on overall consideration of such facts and information as whether the Group has representatives in the invested entity’s board of directors or similar organ of authority, or participates in the financial and operational policy making process of the invested entity, or has material transaction with the invested entity, or sends management staff to the invested entity, or provides key technical data to the invested entity.

If the Group has control over the invested entity, the invested entity should be the Group’s subsidiary. For long-term equity investment obtained through merger of enterprises under the same control, the share of book value of the net assets obtained in the merged party in the ultimate controller’s consolidated statements should be taken as the initial investment cost of the long-term equity investment on the date of merger. If the book value of the merged party’s net assets on the date of merger is negative, the cost of long-term equity investment should be nil.

Regarding acquisition of equity of the invested entity under the same control made in stages through multiple transactions and finally resulting in merger of enterprises, if the transactions are a package deal, the Group will take various transactions as a transaction for acquisition of control during accounting. If the transactions are not a package deal, the share of book value of the net assets held in the merged party after merger in the ultimate controller’s consolidated financial statements should be taken as the initial investment cost of the long-term equity investment on the date of merger. The difference between the initial investment cost and the sum of the book value of long-term equity investment before merger is achieved and the book value of the newly paid consideration for shares further obtained on the date of merger should be used to adjust the capital reserve. If the capital reserve is insufficient for writedown, the retained earnings should be written down.

For long-term equity investment obtained from merger of enterprises not under the same control, the cost of merger should be taken as the initial investment cost.

Regarding acquisition of equity of the invested entity not under the same control made in stages through multiple transactions and finally resulting in merger of enterprises, if the transactions are a package deal, the Group will take various transactions as a transaction for acquisition of control during accounting. If the transactions are not a package deal, the sum of the book value of the originally held equity investment and the new investment cost should be taken as the initial investment cost stated by cost method. If the equity held before the date of acquisition is stated by equity method, other relevant consolidated revenues originally stated by equity method will not be adjusted for the moment. In disposal of the investment, accounting should be carried out on the same basis as that for direct disposal of relevant assets or liabilities by the invested entity. If the equity held before the date of acquisition is stated by fair value in available-for-sale financial assets, the cumulative changes in the fair value originally stated as other consolidated revenues should be stated as current investment profits/losses on the date of merger.

Except for the long-term equity investment obtained through merger of enterprises as mentioned above, the cost of long-term equity investment obtained from cash payment should be the acquisition price actually paid; the cost of long-term equity investment obtained through issuance of equity securities should be the fair value of the equity securities issued; the cost of the long-term equity investment made by investors should be the value specified in the investment contract or agreement.

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APPENDIX II

The Group measures investment in subsidiaries by cost method and investment in joint ventures and associated enterprises by equity method.

For long-term equity investment subsequently measured by cost method, when additional investment is made, the book value of cost of the long-term equity investment should be increased as per the fair value of cost paid for additional investment and relevant transaction expenses incurred. The cash dividend or profit to be distributed as announced by the invested entityshould be recognized as current investment revenue as per the amount to be enjoyed.

For long-term equity investment subsequently measured by equity method, the book value of the long-term equity investment should be adjusted according to the changes in owners’ equity of the invested entity. In particular, in recognition of the share of net gains/losses to be held in the invested entity, the Group should recognize the invested entity’s net profits after adjustment on the basis of the fair value of all identifiable assets of the invested entity at the time of acquisition of investment and the Group’s accounting policies and accounting period, and by offsetting the part attributable to the invested entity and calculated by shareholding percentage in the gains/losses from the internal transactions between the Group and the joint ventures and associated enterprises.

In disposal of long-term equity investment, the difference between the book value of the long-term equity investment and the consideration actually obtained should be stated as current investment revenue. If the long-term equity investment stated by equity method is stated as owners’ equity due to other changes in the owners’ equity of the invested entity other than net gain/loss, the part originally stated as owners’ equity should be restated as current investment profit/loss as per relevant percentage in disposal of the said investment.

If the Group has lost joint control or material influence on the invested entity due to disposal of partial equity investment, the remaining equity after disposal should be restated as available-for-sale financial asset, and the difference between fair value and book value of the remaining equity on the date when the joint control or material influence is lost should be stated as current gain/loss. For other consolidated revenues recognized due to accounting with equity method in original equity investment, accounting should be carried out on the same basis as that for direct disposal of relevant assets or liabilities by the invested entity in discontinuation of accounting by equity method.

If the Group has lost control over the invested entity due to disposal of partial long-term equity investment and the remaining equity after disposal can enable the Group to exert joint control or material influence on the invested entity, accounting should be carried out by equity method, the difference between the book value of the equity disposed of and the disposal consideration should be stated as investment revenue, and the remaining equity should be adjusted by deeming it as having been stated by equity method since acquisition. If the remaining equity after disposal cannot enable the Group to exert joint control or material influence on the invested entity, accounting should be carried out as per relevant provisions on available-for-sale financial assets, the difference between the book value of the equity disposed of and the disposal consideration should be stated as investment revenue, and the difference between the fair value and book value of the remaining equity on the date of loss of control should be stated as current investment profit/loss.

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If the transactions for disposal of equity in stages resulting in loss of controlling interest are not a package deal, the Group will account each transaction respectively. If the transactions are a package deal, various transactions will be taken as a transaction for disposal of subsidiaries resulting in loss of control in accounting. However, before loss of control, the difference between the disposal price of each transaction and the book value of long-term equity investment corresponding to the equity disposal should be recognized as other consolidated revenue and then restated as current gain/loss at the time of loss of control.

15. Investment real estate

Measurement mode of investment real estate

Not Applicable

16. Fixed assets

(1) Recognition conditions

Fixed assets of the Group are tangible assets that simultaneously meet the following conditions, namely, they are held for the purpose of commodity production, labor provision, lease or operation; their service life exceeds one year; they have a high unit value. Fixed assets are recognized when their related economic interests are likely to flow into the Group and their costs can be measured reliably. Fixed assets of the Group include transport equipment, electronic equipment and others. The Group withdraws provision for depreciation of all fixed assets except the fixed assets for which adequate provision has been withdrawn and which are still in use and the land valuated and stated separately. Provision for depreciation is withdrawn based on average service life.

(2) Method of depreciation

							Annual
				Method of	Term of	Residual	depreciation
Type				depreciation	depreciation	value ratio	rate
Transport	equipment			Average service life	5	5.00	19.00
Electronic	equipment	and	others	Average service life	5	5.00	19.00

At the end of each year, the Group reviews the estimated service lives, estimated net residual values and depreciation methods of fixed assets. Any change will be regarded as change in accounting estimates.

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APPENDIX II

• (3) Recognition basis and appraisal and depreciation methods of fixed assets under financing lease

Fixed assets under financing lease of the Group include electronic equipment and others. Fixed assets under financing lease are measured at the lower of the fair value of the leased assets and the present value of the minimum lease payment. The difference between the entry value of the leased assets and the minimum lease payment should be taken as unrecognized finance cost. The depreciation policy for self-owned fixed assets should be used for fixed assets under financing lease. If it can be appropriately determined that the ownership of a leased asset can be obtained upon expiration of the lease term, provision for depreciation of the leased fixed asset should be withdrawn in its estimated service life; otherwise, provision for depreciation of the leased fixed asset should be withdrawn in the shorter of the lease term and the estimated service life of the asset.

17. Construction in progress

The construction in progress is restated as fixed assets according to the value estimated by project budget, value or actual construction costs from the day when the construction is ready for its intended use, and depreciation is withdrawn from next month. The difference in the original value of fixed assets will be adjusted after completion accounting is made.

18. Borrowing costs

For borrowing costs incurred that can be directly stated as fixed assets, investment real estate and inventories, of which the acquisition and construction or production activities take over one year to get ready for their intended use or for sale, they should be capitalized when 1) the asset disbursements have already incurred; 2) the borrowing costs has already incurred; and; 3) the acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale have already started; when the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs should be ceased, and borrowing cost incurred thereafter should be stated as current gains/losses. If the acquisition and construction or production of the assets eligible for capitalization are discontinued abnormally, and the discontinuation lasts for over three months, capitalization of the borrowing costs should be suspended until the acquisition and construction or production activities resume.

As for specially borrowed loans, the to-be-capitalized amount of interests should be determined in light of the actual cost incurred of the specially borrowed loan at the present period minus the income of interests earned on the unused borrowed loans as a deposit in the bank or as a temporary investment; as for general borrowing, the enterprise should calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate should be calculated and determined in light of the weighted average interest rate of the general borrowing.

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APPENDIX II

1. Biological assets

Not applicable

20. Oil and gas assets

Not applicable

21. Intangible assets

(1) Valuation method, service life and impairment test

The Group’s intangible assets include movie and television copyrights, system software and non-patent technologies, which are measured at the actual cost at the time of acquisition. In particular, the consideration actually paid for purchasing intangible assets and other expenses are stated as the actual cost; the actual cost of intangible assets invested by investors should be determined according to the value agreed upon in the investment contract or agreement, but if the value agreed in the contract or agreement is unfair, the actual cost should be determined according to the fair value; for intangible assets, which are owned by the acquiree but not recognized in its financial statements, acquired through merger not under the same control, such intangible assets should be determined according to the fair value at the initial recognition of the acquiree’s assets.

(2) Accounting policy for R&D expenditures

The Group classifies the R&D expenditures as research expenditure and development expenditure according to its nature and whether the intangible assets finally formed in the R&D activities is highly uncertain. The expenditures during the research phase are stated as current gain/loss when incurred; the expenditures during the development phase are recognized as intangible assets when the entity can meet all of the following:

The technical feasibility of completing the intangible asset so that it will be available for use or sale;

Its intention to complete the intangible asset and use or sell it;

The existence of a market for the output of the intangible asset or the intangible asset itself;

The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset;

Its ability to measure reliably the expenditure attributable to the intangible asset during its development.

Expenditures not meeting the aforesaid conditions should be stated as current gains/losses when incurred. Development expenditures that have been stated as gains/losses should no longer recognized as assets later. Capitalized expenditures during the development phase are stated as development expenditures on the balance sheet or presented as intangible assets from the date when the project is ready for the intended use.

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APPENDIX II

22. Impairment of long-term assets

The Group will conduct impairment test if there are signs that impairment of long-term assets such as long-term equity investments, fixed assets, construction in progress and intangible assets with limited service life may occur on the balance sheet date. Impairment test is conducted by the end of every year on goodwill and intangible assets with indefinite service life regardless whether there is any sign of impairment.

After the impairment test, if the book value of the asset exceeds its recoverable amount, the difference should be recognized as impairment loss. Once the impairment loss of the aforesaid asset is confirmed, it will not be reversed in the subsequent accounting period.

23. Long-term expenses to be amortized

The Group’s long-term expenses to be amortized include renovation fees and so on, which are evenly amortized in the benefit period. If long-term expenses to be amortized are not beneficial to subsequent accounting periods, the remaining value of the items after amortization should be stated as current gains/losses.

24. Employee remuneration

(1) Accounting for short-term remuneration

The Group’s employee remuneration includes short-term remuneration, post-employment benefits, termination benefits and other long-term benefits.

Short-term compensation mainly includes salaries, bonuses, subsidies and welfares. During the accounting period when the employees serve the Group, the short-term compensation actually incurred should be recognized as liability and stated as current gain/loss or relevant asset cost based on the beneficiary.

(2) Accounting for post-employment benefits

After-employment benefits mainly include basic endowment insurance, unemployment insurance, etc., which are classified as defined contribution plans according to the risks and obligations undertaken by the company. For the defined contribution plans, the contribution paid to individual employee for its services during the accounting period on the balance sheet date should be recognized as liability and stated as current gain/loss or relevant asset cost based on the beneficiary.

(3) Accounting for other long-term employee benefits

Other long-term employee benefits are all employee r emuneration other than short-term r emuneration, post-employment benefits and termination benefits, including long-term compensated absences, long-term disability benefits, long-term profit sharing plan, etc.

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APPENDIX II

25. Accrued liability

If the businesses relating to contingencies, e.g. external guarantees, commercial acceptance bill discount, pending litigation or arbitration and product quality assurance, meet all the following conditions, the Group recognizes them as accrued liabilities: (1) the obligations are currently undertaken by the Group; (2) fulfillment of the said obligations is likely to lead to outflow of the economic interest of the enterprise; and (3) the amount of the said obligations can be measured reliably.

26. Share-based payment

The equity-settled share-based payment in return for employee services should be measured at the fair value of the equity instruments granted to the employees on the date of the grant. If the right cannot be exercised until the vesting period comes to an end or until the prescribed performance conditions are met, then within the vesting period, the said fair value amount should, based on the best estimate of the number of vested equity instruments, be included in the relevant cost or expense by the straight line method and the capital reserves should be increased accordingly.

(1) Method of determining the fair value of equity instruments

• 1) For equities granted to employees, their fair value is measured as per the market value of the Group’s shares, and adjusted according to the terms and conditions (excluding the vesting conditions outside market conditions) based on which the shares are granted.

• 2) For stock options granted to employees, it is difficult to obtain their market prices in many cases. If there is no trade option with similar terms and conditions, the Group applies the appropriate option pricing model to estimate the fair value of the granted options.

(2) Basis for determining optimal estimate of vested equity instruments

On each balance sheet date within the vesting period, the Group makes the best estimate according to the latest changes to the number of vested employees and other follow-up information, and amend the estimate of the number of vested equity instruments. On the vesting date, the final estimate of the number of vested equity instruments should be equal to the number of the actually vested equity instruments.

• (3) Accounting for implementation of share-based payment plans

• 1) As to a cash-settled share-based payment, if the right may be exercised immediately after the grant, the fair value of the liability undertaken by the Group should, on the date of the grant, be included in the relevant costs or expenses, and the liabilities should be increased accordingly. On each balance sheet date and each account date prior to the settlement, the fair value of the liability should be re-measured and the changes thereof should be included in the current profits/losses.

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• 2) As to a cash-settled share-based payment, if the right may not be exercised until the vesting period comes to an end or until the specified performance conditions are met, on each balance sheet date within the vesting period, the services obtained in the current period should, based on the best estimate of the information about the exercisable right, be included in the relevant costs or expenses and the corresponding liabilities at the fair value of the liability undertaken by the Group.

• 3) As to an equity-settled share-based payment in return for services of employees, if the right may be exercised immediately after the grant, the fair value of the equity instruments should, on the date of the grant, be included in the relevant cost or expense and the capital reserves should be increased accordingly.

• 4) As to a equity-settled share-based payment in return for employee services, if the right cannot be exercised until the vesting period comes to an end or until the prescribed performance conditions are met, then on each balance sheet date within the vesting period, the services obtained in the current period should, based on the best estimate of the number of vested equity instruments, be included in the relevant costs or expenses and the capital reserves at the fair value of the equities instruments on the date of the grant.

(4) Accounting for modifications of share-based payment plan

When modifying the share-based payment plan, if the modification leads to an increase in the fair value of equity instruments granted, the Group should recognize the increase of the services obtained according to the increase in the fair value of equity instruments. If the modification leads to an increase in the number of equity instruments granted, the Group should recognize the increase in the fair value of equity instruments as increase of the services obtained. The increase in the fair value of equity instruments refers to the difference in the fair value of equity instruments before and after the modification on the date of modification. If the modification reduces the total fair value of share-based payment or adopts a mode unfavourable to the employees in respect of changes in the terms and conditions of share-based payment plan, the Group should nevertheless continue to account for the services obtained as if that modification had never occurred, unless the Group has cancelled some or all equity instruments granted.

(5) Accounting for termination of share-based payment plan

If a grant of equity instruments is cancelled or settled during the vesting period (other than a grant cancelled by forfeiture when the vesting conditions are not satisfied), the Group should:

• 1) Account for the cancellation or settlement as an acceleration of vesting, and should therefore recognise immediately the amount that otherwise would have been recognised for services received over the remainder of the vesting period;

• 2) Account for any payment made to the employee on the cancellation or settlement as the repurchase of an equity interest, and should the payment exceeds the fair value of the equity instruments granted at the repurchase date, include such excess as current expense.

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APPENDIX II

1. Other financial instruments including preferred stocks and perpetual bonds

Not applicable

28. Revenues

The Group’s operating revenue mainly includes advertising revenue, terminal revenue, membership revenue, revenue from distribution of films and TV plays. Revenue recognition principles are as follows:

Revenues from sales of commodities should be recognized when the following conditions are simultaneously satisfied: (1) the major risks and rewards concerning the ownership of the commodities are transferred to the buyers; (2) the Group no longer reserves the continuous management right generally related to ownership, or implements effective control over the commodities sold; (3) the amount of revenue can be measured reliably; (4) relevant economic benefits are likely to flow in; (5) relevant costs incurred or to be incurred can be measured reliably.

The service revenue can be recognized when the total revenue and total cost of labor services can be measured reliably, the economic benefits related to labor services are likely to flow into the Group and the progress of the labor service can be reliably determined. At the balance sheet date, the results of the labor service transaction can be reliably estimated, relevant service revenue is recognized according to the percentage of completion, and the percentage of completion is determined by the proportion of the service provided to the service that should be provided. Where the labor service transaction result cannot be estimated reliably, and if the service cost incurred is expected to be compensated, the service revenue will be recognized according to the amount of labor cost that can be compensated, and the service cost incurred should be carried forward. If the results of the labor service transaction cannot be estimated reliably and it is expected that the service cost incurred cannot be fully compensated, the labor costs incurred should be stated as current gains/losses, and the revenue from providing labor services would not be recognized.

Revenue from transfer of right to use assets should be recognized when relevant economic benefits are likely to flow in and the amount of revenue can be measured reliably.

Specific revenue recognition principles of the Group:

(1) Advertising business

Basis for recognition: the revenue is recognized according to the advertising fees and publishing progress as agreed in the sales contract signed with the advertising agencies or advertisers.

(2) Terminal business

Basis for recognition: the sales revenue each month is recognized according to the actual sales of intelligent terminal products and unit sales price in that month;

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APPENDIX II

• (3) Membership and distribution businesses

• 1) Revenue of network paid services

Basis for recognition: service revenue each month is recognized according to the actual service price in that month.

• 2) Revenue from distribution of online video copyright

Basis for recognition: the revenue is recognized after giving authorization to the other party and receiving the authorization fee or obtaining the right to receive the authorization fee according to the copyright distribution contract.

(3) Revenue from distribution of films and TV plays

• 1) First transfer of broadcasting right

Basis for recognition: the revenue is recognized when the TV copies, videotapes and other carriers are transferred to the buyer for the first time after the shooting is completed and the TV Play Production License is obtained upon approval of the film and television administrative departments, and relevant economic benefits are likely to flow in the Group.

• 2) Multiple transfers of broadcasting right

Basis for recognition: the revenue is recognized at one time in the year when the broadcasting right started as specified in the contract.

• 3) Other ways

Basis for recognition: for proceeds obtained through presale of distribution right of the film and other rights by means of outright sale in whole or in part before shooting is completed or the promise of giving the premiere (broadcasting) right, the sales revenue is recognized when the shooting is completed and the TV play is provided to the customer for use according to the contract.

(4) Other businesses

Basis for recognition: the revenue is recognized when relevant conditions are satisfied.

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APPENDIX II

29. Government subsidy

• (1) Judgment basis and accounting for assets-related government subsidies

The Group’s government subsidies include special subsidies, project subsidies and so on.

If the government subsidy is a monetary asset, it should be measured in light of the amount actually received. For the subsidy appropriated in accordance with the fixed quota standard or there is conclusive evidence at the end of the year that the enterprise can meet relevant requirements of financial support policies and is expected to receive financial support funds, the subsidy should be measured in light of the receivable amount. If a government subsidy is a non-monetary asset, it should be measured at its fair value. If its fair value cannot be obtained in a reliable way, it should be measured at its nominal amount (RMB1).

Standards for recognition of asset-related government subsidies: Subsidies acquired by the Group from the government for the acquisition, construction or otherwise formation of long-term assets are recognized as asset-related government subsidies. The assets-related government subsidies are recognized as deferred earnings, evenly allocated in the service life of relevant assets, and stated as current gains/losses.

(2) Judgment basis and accounting for income-related government subsidies

Standards for recognition of income-related government subsidies: The Group recognizes the non-asset related subsidies it receives from the government as income-related government subsidies, e.g. various rewards, quota subsidies, financial discounts, allocated R&D expenses (excluding purchase and construction of fixed assets). The income-related government subsidies should be recognized as deferred earnings if they are used for making up relevant expenses or losses in the subsequent period and should be stated as current gains/losses during the period when relevant expenses are recognized. The income-related government subsidies used for making up relevant expenses or losses incurred should be directly stated as current gains/losses.

30. Deferred tax assets/deferred tax liabilities

The deferred tax assets and deferred tax liabilities of the Group should be calculated and recognized as per the difference between the tax basis and book values of the assets and liabilities. A deferred tax asset should be recognised for the deductible losses of deduction of taxable incomes that can be carried forward to subsequent years according to tax laws. A deferred tax liability should not be recognised for temporary differences arising from the initial recognition of goodwill. Deferred tax assets and deferred tax liabilities should not be recognized for temporary differences in the initial recognition of assets or liabilities arising from non-business merger transactions which have no effect on the accounting profits and taxable incomes (or deductible losses). The deferred tax assets and deferred tax liabilities on the balance sheet date should be measured at the applicable tax rate for the period in which the said assets are expected to be recovered or the said liabilities are expected to be settled.

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APPENDIX II

The Group recognizes deferred tax assets to the extent that the amount of future taxable income to be offset by the deductible temporary differences, deductible loss or tax deduction is likely to be obtained.

31. Leasing

• (1) Accounting for operating lease

If the Group is a lessee, the rent should be stated as relevant asset cost or current gain/loss on a straight-line basis in various periods of the lease term.

(2) Accounting for finance lease

If the Group is a lessee, on the lease commencement date, the book value of fixed assets of finance lease should be the lower of the fair value of the leased assets and the present value of minimum lease payments on the lease commencement date; the minimum lease payments should be stated as the book value of long-term payables; the differences between the two should be recognised as unrecognized finance costs. The initial direct cost incurred should be stated as the value of the leased assets. When making depreciation for financial lease assets, the Group should adopt the depreciation policy consistent with that for its own depreciable assets, and the depreciation period should be subject to the lease contract. If it can be appropriately determined that the ownership of a leased asset can be obtained by the Group upon expiration of the lease term, the life of the leased asset from the lease commencement date should be regarded as the depreciation period; otherwise the lease term or the life of the leased asset, whichever is shorter, should be regarded as the depreciation period.

32. Other important accounting policies and accounting estimates

Not applicable

1. Changes in important accounting policies and accounting estimates

2. (1) Changes in important accounting policies

3. Applicable � Not Applicable

4. (2) Changes in important accounting estimates

5. Applicable � Not Applicable

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APPENDIX II

34. Others

VI. Taxes

I. Main taxes and tax rates

Taxes

Tax basis

Tax rates

17% or 6% (among the VAT taxable revenues, the applicable tax rate of sales revenue of inventories and raw materials Sales revenue of is 17%, and the applicable tax rate of VAT inventories, raw materials revenue from advertising on video and taxable services platforms, revenue from distribution of copyright of network videos, film & TV distribution revenue and telecommunications revenue is 6%.) Business tax Taxable items 3% Municipal maintenance and Turnover tax payable 7% or 5% construction tax Enterprise income tax Taxable income 15%, 16.5%, 25% (note 2) Education surcharge Turnover tax payable 3% Local education surcharge Turnover tax payable 2% Construction fee for Revenue from advertising 3% cultural undertakings on video platforms

Information about taxpayers entitled to different corporate income tax rates

Name of taxpayer		Income tax rate
Leshi Internet Information & Technology Corp (Beijing)		15%
Letv Information Technology (Tibet) Co., Ltd.		15%
Letv Information Technology (Hong Kong) Co., Ltd.		16.5%
Khorgos Lehai Culture Media Co., Ltd.	Exempt for 5 years from the
	year in	which the first revenue
		is obtained
Other taxpayers than the abovementioned ones		25%

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

2. Tax preference

The Company was certificated as a high-and-new technology enterprise in 2008. In 2014, the Company applied for the review of high-and-new technology enterprise qualification, and obtained the Certificate for High-and-New Technology Enterprise (No. GR201411001113) after being approved jointly by Beijing Municipal Science & Technology Commission, Beijing Municipal Finance Bureau, Beijing State Taxation Bureau and Beijing Local Taxation Bureau. The valid period of the certificate is 3 years. According to the Enterprise Income Tax Law and relevant laws, the Company can enjoy a preferential enterprise income tax rate of 15% for national high-and-new technology enterprises during the validity period.

According to Document Zang Zheng Fa [2014] No. 51 of the People’s Government of Tibet Autonomous Region and the Notice of the People’s Government of Tibet Autonomous Region on Printing and Distributing the Measures for the Implementation of Enterprise Income Tax Policies of Tibet Autonomous Region, Letv Information Technology (Tibet) Co., Ltd. can enjoy a preferential enterprise income tax rate of 15% for enterprises in Tibet Autonomous Region for the implementation of the western development strategy. Besides, from January 1st, 2015 to December 31st, 2017, as for the income tax paid by enterprises according to the aforesaid policy, local portion (40%) of the enterprise income tax to be paid by enterprises in Tibet Autonomous Region is exempted temporarily.

Khorgos Lehai Culture Media Co., Ltd., which is an enterprise falling within the scope in the Catalogue of Enterprise Income Tax Incentives for Industries Particularly Encouraged by Poverty Areas of Xinjiang for Development upon filing with the State Administration of Taxation of Horgos Economic Development Zone, the Xinjiang Uygur Autonomous Region on September 18th, 2015, should be exempted from the entire enterprise income tax on the income for five year, starting from the first year in which manufacturing or business operational revenue is earned.

VII. Notes to items in the consolidated financial statement

1. Monetary fund

Unit: RMB

	Balance at the end	Balance at the beginning
Item	of the period	of the period
Cash on hand	189,596.70	1,320,234.22
Bank deposit	2,714,588,518.44	446,028,361.41
Other monetary funds	15,000,000.00	52,501,560.66
Total	2,729,778,115.14	499,850,156.29
Including: Total of deposits with
overseas bank	15,754,751.22	33,548,431.46

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APPENDIX II

Other descriptions

Other monetary funds of RMB15,000,000.00 are deposit for bank acceptance bill. Besides, ending monetary funds do not have items with restrictions on use due to mortgage, pledge or freezing of account, and items with potential recovery risks.

1. Notes receivable

2. (1) Presentation of notes receivable by category

Unit: RMB

Item	Ending balance	Opening balance
Bank acceptance bill	435,380,941.24	10,837,263.64
Commercial acceptance bill	473,750,000.00	500,000.00
Total	909,130,941.24	11,337,263.64

• (2) Notes receivable endorsed or discounted by the Company at the end of the period and not mature by the balance sheet date

		Unit: RMB
	Amount derecognized at the	Amount not derecognized at
Item	end of the period	the end of the period
Bank acceptance bill	1,860,880,908.56	0.00
Commercial acceptance bill	100,000,000.00	0.00
Total	1,960,880,908.56	0.00

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Accounts receivable

2. (1) Disclosure of accounts receivable by category

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Unit: RMB
----- End of picture text -----

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----- Start of picture text -----

Ending balance Opening balance
Category Provision for bad debts Provision for bad debts
Book balance Provision Book balance Provision
Amount Percentage Amount percentage Book value Amount Percentage Amount percentage Book value
Account receivable
whose amount is
significant individually
and for which
provision for bad debts
is withdrawn
individually 0.00 0.00% 0.00 0.00% 0.00 0.00 0.00% 0.00 0.00% 0.00
Accounts receivable
for which the
provision for bad debts
is withdrawn by
combination of credit
risk features 3,559,108,861.12 100.00% 199,425,790.78 5.60% 3,359,683,070.34 1,978,887,441.18 100.00% 86,281,098.13 4.36% 1,892,606,343.05
Account receivable
whose amount is
significant individually
and for which
provision for bad debts
is withdrawn
individually 0.00 0.00% 0.00 0.00% 0.00 0.00 0.00% 0.00 0.00% 0.00
Total 3,559,108,861.12 100.00% 199,425,790.78 5.60% 3,359,683,070.34 1,978,887,441.18 100.00% 86,281,098.13 4.36% 1,892,606,343.05
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Account receivable whose amount is significant individually and for which provision for bad debts is withdrawn individually by the end of the period:

• Applicable � Not Applicable

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Account receivable for which provision is withdrawn for bad debts as per age analysis method in portfolio:

� Applicable □ Not Applicable

Unit: RMB

Age

Ending balance

Age		Ending balance
	Accounts receivable	Provision for bad debts	Withdrawal percentage
Within 1 year	2,835,350,219.91	85,060,506.60	3.00%
1-2 years	501,775,388.52	50,177,538.85	10.00%
2-3 years	187,215,524.05	46,803,881.01	25.00%
3-4 years	34,767,728.64	17,383,864.32	50.00%
4-5 years	0.00	0.00	50.00%
Over 5 years	0.00	0.00	100.00%
Total	3,559,108,861.12	199,425,790.78

Accounts receivable for which provision is withdrawn for bad debts as per balance percentage method in portfolio:

□ Applicable � Not Applicable

There is no account receivable for which provision is withdrawn for bad debts as per other methods in portfolio.

• (2) Provision for bad debts withdrawn, recovered or reversed in the current period

In the current period, the provision for bad debts withdrawn amounted to RMB113,144,692.65, and the provision for bad debts recovered or reversed was RMB0.00.

(3) Top five balances of accounts receivable by debtor at the end of the period

This year, the top five balances of accounts receivable by debtor at the end of the period totalled RMB716,021,519.30, accounting for 20.12% of the total balance of accounts receivable at the end of the period, and the balance of corresponding provision withdrawn for bad debts at the end of the period was RM23,355,014.07.

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APPENDIX II

1. Advance payments

2. (1) Presentation of advance payments by age

Unit: RMB

Age Within 1 year 1 to 2 years 2 to 3 years Over 3 years Total	Ending balance Amount Percentage 399,302,316.42 77.06% 115,687,497.40 22.33% 525,000.00 0.10% 2,664,996.07 0.51% 518,179,809.89 —	Opening balance Amount Percentage 282,868,786.54 94.70% 12,346,139.91 4.13% 2,845,996.07 0.95% 657,350.00 0.22% 298,718,272.52 —

(2) Top five balances of advance payments by prepaid item at the end of the period This year, the top five balances of advance payments by prepaid item at the end of the period totalled RMB257,135,298.86, accounting for 49.62% of the total balance of advance payments at the end of the period.

1. Other receivables

2. (1) Disclosure of other receivables by category

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Unit: RMB
Ending balance Opening balance
Category Provision for bad debts Provision for bad debts
Book balance Provision Book balance Provision
Amount Percentage Amount percentage Book value Amount Percentage Amount percentage Book value
Other receivable
whose amount is
significant
individually and for
which provision for
bad debts is
withdrawn
individually 0.00 0.00% 0.00 0.00% 0.00 0.00 0.00% 0.00 0.00% 0.00
Other receivables for
which the provision
for bad debts is
withdrawn by
combination of
credit risk features 170,611,638.59 99.99% 4,991,259.66 2.93% 165,620,378.93 77,122,913.09 99.97% 1,283,526.40 1.66% 75,839,386.69
Other receivable
whose amount is
significant
individually and for
which provision for
bad debts is
withdrawn
individually 19,500.00 0.01% 19,500.00 100.00% 0.00 19,500.00 0.03% 19,500.00 100.00% 0.00
Total 170,631,138.59 100.00% 5,010,759.66 2.94% 165,620,378.93 77,142,413.09 100.00% 1,303,026.40 1.69% 75,839,386.69
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APPENDIX II

Other receivable whose amount is significant individually and for which provision for bad debts is withdrawn individually by the end of the period:

□ Applicable � Not Applicable

Other receivables for which provision is withdrawn for bad debts as per age analysis method in portfolio:

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Unit: RMB

Ending balance

	Ending balance	Ending balance
Age	Other receivables Provision for bad debts		Withdrawal percentage
Within 1 year	46,815,342.72	1,404,460.27	3.00%
1-2 years	2,642,403.75	264,240.38	10.00%
2-3 years	1,289,786.02	322,446.51	25.00%
3-4 years	6,000,225.00	3,000,112.50	50.00%
4-5 years	0.00	0.00	50.00%
Over 5 years	0.00	0.00	100.00%
Total	56,747,757.49	4,991,259.66

Other receivables for which provision is withdrawn for bad debts as per balance percentage method in portfolio:

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Other receivables for which provision is withdrawn for bad debts as per other methods in portfolio:

� Applicable □ Not Applicable

		Ending balance
		Provision for	Withdrawal
Age	Other receivables	bad debts	percentage (%)
Petty cash and deposit	16,451,082.02	0.00	0.00
Account balance of the third party
payment platform	88,321,682.57	0.00	0.00
Equity incentive	9,091,116.51	0.00	0.00
Total	113,863,881.10	0.00	0.00

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FINANCIAL INFORMATION OF LESHI INTERNET

• (2) Provision for bad debts withdrawn, recovered or reversed in the current period

In the current period, the provision for bad debts withdrawn amounted to RMB3,707,733.26, and the provision for bad debts recovered or reversed was RMB0.00.

• (3) Other receivables classified by nature of payment

Unit: RMB

	Ending book	Opening book
Nature of payment	balance	balance
Current account	45,329,892.87	29,914,399.84
Petty cash and deposit	36,979,563.15	30,583,932.50
Account balance of the third party payment
platform	88,321,682.57	16,644,080.75
Total	170,631,138.59	77,142,413.09

• (4) Top five balances of other receivables by debtor at the end of the period

Unit: RMB

				Percentage in	Balance of
				total balance of	provision for
				other receivables	bad debts at
				at the end of the	the end of the
Name of entity	Nature of payment	**Ending balance **	Age	period	period
Alipay account	Account balance	50,308,869.02	Within 1 year	29.48%	0.00
Yeepay account	Account balance	35,440,257.42	Within 1 year	20.77%	0.00
Lepa Marketing
Services (Beijing)	Transactions with
Co., Ltd.	connected parties	16,767,553.14	Within 1 year	9.83%	503,026.59
LeTV Holdings	Transactions with
(Beijing) Co., Ltd.	connected parties	10,841,367.97	Within 1 year	6.35%	325,241.04
Equity incentive	Current account	9,091,116.51	Within 1 year	5.33%	0.00
Total	—	122,449,164.06	—	71.76%	828,267.63

1. Inventories

2. (1) Inventories by category

Unit: RMB

		Ending balance		Opening balance	Opening balance
		Provision for			Provision for
Item	Book balance	depreciation	Book value	Book balance	depreciation	Book value
Raw materials	62,403,803.34	0.00	62,403,803.34	128,946,910.23	0.00	128,946,910.23
Products in process	0.00	0.00	0.00	156,106,591.03	0.00	156,106,591.03
Commodities in stock	1,071,744,659.69	3,300,877.24	1,068,443,782.45	409,404,042.71	4,850,053.09	404,553,989.62
Consigned finished goods	7,939,839.28	0.00	7,939,839.28	43,919,487.81	0.00	43,919,487.81
Total	1,142,088,302.31	3,300,877.24	1,138,787,425.07	738,377,031.78	4,850,053.09	733,526,978.69

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FINANCIAL INFORMATION OF LESHI INTERNET

(2) Provision for inventory depreciation

						Unit: RMB
		**Increase in the **	current	**Decrease in the **	current
		period		period
	Opening			Reversal or		Ending
Item	balance	Withdrawal	Others	charge-off	Others	balance
Raw materials	0.00	0.00	0.00	0.00	0.00	0.00
Products in process	0.00	0.00	0.00	0.00	0.00	0.00
Commodities in stock	4,850,053.09	3,300,877.24	0.00	4,850,053.09	0.00	3,300,877.24
Consigned finished goods	0.00	0.00	0.00	0.00	0.00	0.00
Total	4,850,053.09	3,300,877.24	0.00	4,850,053.09	0.00	3,300,877.24

7. Other current assets

								Unit: RMB
Item					Ending balance		Opening balance
Input tax to be deducted					204,349,614.99			0.00
Bank financial products					63,266,852.34		50,000,000.00
Funds incurred by co-production of		films			23,000,000.00		23,000,000.00
Total					290,616,467.33		73,000,000.00
8. **Available-for-sale **	financial assets
(1) Available-for-sale	financial assets
								Unit: RMB
		**Ending **	balance			Opening balance
		Provision for					Provision for
Item	Book balance	impairment		Book value		Book balance	impairment	Book value
Available-for-sale equity
instruments	0.00		0.00		0.00	0.00	0.00	0.00
Available-for-sale equity
instruments	159,529,787.23		0.00 159,529,787.23			20,000,000.00	0.00	20,000,000.00
Measured at fair value	85,748,670.26		0.00	85,748,670.26		0.00	0.00	0.00
Measured by cost	73,781,116.97		0.00	73,781,116.97		20,000,000.00	0.00	20,000,000.00
Total	159,529,787.23		0.00 159,529,787.23			20,000,000.00	0.00	20,000,000.00

— 231 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

(2) Available-for-sale financial assets measured at fair value at the end of the period

			Unit: RMB
Category of available-for-sale	Available-for-sale	Available-for-sale
financial assets	equity instruments	debt instruments	Total
Cost of equity instrument/amortized
cost of debt instrument	0.00	0.00	0.00
Fair value	85,748,670.26	0.00	85,748,670.26
Accumulative amount of the change in
fair value stated as other
consolidated revenue	5,072,950.59	0.00	5,072,950.59
Amount of provision for impairment	0.00	0.00	0.00

— 232 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

• (3) Available-for-sale financial assets measured by cost at the end of the period

Unit: RMB

Beginning of the period I 20,000,000.00 0.00 0.00 0.00 0.00	Book b ncrease in the current period 0.00 27,609,163.00 38,971,953.97 1,000,000.00 6,200,000.00	alance Decrease in the current period 20,000,000.00 0.00 0.00 0.00 0.00	End of the period 0.00 27,609,163.00 38,971,953.97 1,000,000.00 6,200,000.00	Beginning of the period I 0.00 0.00 0.00 0.00 0.00	Provision for ncrease in the current period 0.00 0.00 0.00 0.00 0.00	impairment Decrease in the current period 0.00 0.00 0.00 0.00 0.00	End of the period 0.00 0.00 0.00 0.00 0.00	Percentage of equity in the invested entity 5.26% 1.43% 10.34% 10.00% 1.29%	Cash bonus of the current period 0.00 0.00 0.00 0.00 0.00

Other descriptions

1. Long-term equity investment

Unit: RMB

				**Increase/decrease in the **	**Increase/decrease in the **	current period
							Cash
				Investment			dividends			Balance of
				gains/losses	Adjustments		or profits			provision for
				recognized	to other		announced	Provision		impairment at
	Opening	Investment	Investment	based on	consolidated	Other equity	to be	withdrawn for	Ending	the end of the
Invested entity	balance	added	reduced	equity method	revenue	changes	distributed	impairment Others	balance		period
I. Joint ventures
II. Associated enterprises
Beijing Zhiyi
Information
Technology
Co., Ltd.		10,000,000.00		45,254.04					10,045,254.04
Subtotal		10,000,000.00		45,254.04					10,045,254.04
Total		10,000,000.00		45,254.04					10,045,254.04

— 233 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Fixed assets

2. (1) Fixed assets

Unit: RMB

				Electronic
			Transport	equipment and
Item			equipment	others	Total
I.	Original value:
	1.	Opening balance	10,384,851.04	370,859,490.67	381,244,341.71
	2.	Increase in the current period		399,907,742.17	399,907,742.17
		(1) Purchase		399,907,742.17	399,907,742.17
		(2) Carried over from
		construction in progress
		(3) Increase from merger of
		enterprises
	3.	Decrease in the current period
		(1) Disposal or scrapping
	4.	Ending balance	10,384,851.04	770,689,606.98	781,074,458.02
II.	Accumulated depreciation
	1.	Opening balance	6,991,305.10	31,237,951.51	38,229,256.61
	2.	Increase in the current period	1,332,865.22	112,241,772.39	113,574,637.61
		(1) Withdrawal	1,332,865.22	112,241,772.39	113,574,637.61
	3.	Decrease in the current period
		(1) Disposal or scrapping
	4.	Ending balance	8,324,170.32	143,402,098.04	151,726,268.36
III.	Provision for depreciation
	1.	Opening balance
	2.	Increase in the current period
		(1) Withdrawal
	3.	Decrease in the current period
		(1) Disposal or scrapping
	4.	Ending balance
IV.	Book	value
	1.	Book value at the end of the
		period	2,060,680.72	627,287,508.94	629,348,189.66
	2.	Book value at the beginning of
		the period	3,393,545.94	339,621,539.16	343,015,085.10

— 234 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (2) Fixed assets acquired under finance leases

Unit: RMB

Original book Cumulative Provision for Item value depreciation impairment Book value Electronic equipment and others 253,824,189.54 92,329,476.78 161,494,712.76 Total 253,824,189.54 92,329,476.78 161,494,712.76

Item

1. Intangible assets

Unit: RMB

Item

Movie and Non-patented television technology System software copyrights Total

• I. Original value

• Opening balance 291,134,360.78 273,928,092.56 4,364,942,827.23 4,930,005,280.57 2. Increase in the current period 487,386,999.74 227,295,154.84 2,390,366,938.41 3,105,049,092.99 (1) Purchase 10,030,163.48 8,921,698.17 2,390,366,938.41 2,409,318,800.06 (2) In-house R&D 477,356,836.26 218,373,456.67 695,730,292.93 (3) Increase from merger of enterprises

• Decrease in the current period 127,314.50 16,212,030.70 655,644,923.78 671,984,268.98 (1) Disposal 76,210,203.73 76,210,203.73 (2) Maturity 127,314.50 16,212,030.70 579,434,720.05 595,774,065.25

• Ending balance 778,394,046.02 485,011,216.70 6,099,664,841.86 7,363,070,104.58

II. Cumulative amortization 1. Opening balance 88,531,156.55 44,701,231.20 1,453,066,963.80 1,586,299,351.55 2. Increase in the current period 47,276,870.76 45,082,885.72 1,433,763,989.63 1,526,123,746.11 (1) Withdrawal 47,276,870.76 45,082,885.72 1,433,763,989.63 1,526,123,746.11

1. Decrease in the current period 127,314.50 16,212,030.70 618,010,116.82 634,349,462.02 (1) Disposal 38,575,396.77 38,575,396.77 (2) Maturity 127,314.50 16,212,030.70 579,434,720.05 595,774,065.25

2. Ending balance 135,680,712.81 73,572,086.22 2,268,820,836.61 2,478,073,635.64

— 235 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

					Movie and
			Non-patented		television
Item			**technology **	System software	copyrights	Total
III.	Provision for depreciation
	1.	Opening balance	4,609,325.83		554,697.13	5,164,022.96
	2.	Increase in the current
		period				0.00
		(1) Withdrawal				0.00
	3.	Decrease in the current
		period				0.00
		(1) Disposal
	4.	Ending balance	4,609,325.83		554,697.13	5,164,022.96
IV.	Book value
	1.	Book value at the end of
		the period	638,104,007.38	411,439,130.48	3,830,289,308.12	4,879,832,445.98
	2.	Book value at the
		beginning of the period	197,993,878.40	229,226,861.36	2,911,321,166.30	3,338,541,906.06

At the end of the period, the intangible assets cumulatively formed through in-house R&D of the Company accounted for 16.19% of the balance of intangible assets.

12. Development expenses

Unit: RMB

			Increase in the current period	Increase in the current period	**Decrease in the **	current period	current period
			Internal			Carried over to
		Opening	development		Recognized as	current gains
Item		balance	costs	Others	intangible assets		and losses	Ending balance
Item	2	6,827,866.17	19,255,627.84	0.00	0.00		0.00	26,083,494.01
Item	3	18,217,139.45	31,932,632.73	0.00	0.00		0.00	50,149,772.18
Item	4	38,686,474.09	11,709,926.34	0.00	50,396,400.43		0.00	0.00
Item	5	7,885,260.02	11,719,062.03	0.00	19,604,322.05		0.00	0.00
Item	6	38,056,424.15	10,792,169.93	0.00	48,848,594.08		0.00	0.00
Item	8	17,951,325.05	13,798,519.49	0.00	31,749,844.54		0.00	0.00
Item	11	12,932,898.91	11,215,463.73	0.00	0.00		0.00	24,148,362.64
Item	12	7,743,463.01	10,532,684.28	0.00	18,276,147.29		0.00	0.00
Item	13	8,181,622.39	16,147,376.10	0.00	0.00		0.00	24,328,998.49
Item	14	8,363,995.14	11,977,104.52	0.00	0.00		0.00	20,341,099.66
Item	15	16,887,086.04	9,245,169.64	0.00	0.00		0.00	26,132,255.68
Item	17	3,614,896.86	32,789,679.12	0.00	0.00		0.00	36,404,575.98
Item	19	18,052,414.07	10,191,690.05	0.00	28,244,104.12		0.00	0.00
Item	20	29,989,858.49	9,441,194.85	0.00	39,431,053.34		0.00	0.00
Item	22	10,950,997.68	12,428,398.84	0.00	23,379,396.52		0.00	0.00
Item	25	22,259,960.88	23,197,049.47	0.00	45,457,010.35		0.00	0.00

— 236 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

			Increase in the current period	Increase in the current period	**Decrease in the **	current period	current period
			Internal			Carried over to
		Opening	development		Recognized as	current gains
Item		balance	costs	Others	intangible assets		and losses	Ending balance
Item	27	10,344,353.37	1,894,361.22	0.00	12,238,714.59		0.00	0.00
Item	28	1,319,409.11	11,629,167.07	0.00	12,948,576.18		0.00	0.00
Item	29	5,723,054.35	6,982,105.98	0.00	12,705,160.33		0.00	0.00
Item	30	1,368,209.04	19,219,689.69	0.00	0.00		0.00	20,587,898.73
Item	32	8,248,293.83	20,002,796.66	0.00	28,251,090.49		0.00	0.00
Item	33	9,231,694.60	1,136,291.51	0.00	10,367,986.11		0.00	0.00
Item	34	2,949,729.44	6,813,021.13	0.00	9,762,750.57		0.00	0.00
Item	35	4,843,999.99	1,193,961.14	0.00	6,037,961.13		0.00	0.00
Item	36	38,181,289.00	-38,181,289.00	0.00	0.00		0.00	0.00
Item	38	6,434,625.10	100,731.14	0.00	6,535,356.24		0.00	0.00
Item	39	440,159.10	7,640.57	0.00	0.00		0.00	447,799.67
Item	40	253,744.64	22,168.40	0.00	0.00		0.00	275,913.04
Item	41	902,575.97	0.00	0.00	902,575.97		0.00	0.00
Item	42	583,603.45	0.00	0.00	583,603.45		0.00	0.00
Item	43	96,473.41	344,851.15	0.00	0.00		0.00	441,324.56
Item	44	70,568.88	47,888.86	0.00	0.00		0.00	118,457.74
Item	45	435,640.73	840,396.81	0.00	1,276,037.54		0.00	0.00
Item	46	308,600.73	1,029,912.91	0.00	0.00		0.00	1,338,513.64
Item	47	29,166.43	0.00	0.00	29,166.43		0.00	0.00
Item	48	19,742.94	102,270.83	0.00	122,013.77		0.00	0.00
Item	49	195,913.73	-195,913.73	0.00	0.00		0.00	0.00
Item	50	21,171.78	36,723.09	0.0	57,894.87		0.00	0.00
Item	51	45,315.14	0.00	0.00	0.00		45,315.14	0.00
Item	52	23,256.54	0.00	0.00	23,256.54		0.00	0.00
Item	53	70,510.26	76,416.58	0.00	146,926.84		0.00	0.00
Item	54	110,157.23	0.00	0.00	110,157.23		0.00	0.00
Item	55	400,135.58	114,326.53	0.00	0.00		0.00	514,462.11
Item	56	81,075.59	96,259.33	0.00	0.00		0.00	177,334.92
Item	57	2,005,553.29	3,931,418.70	0.00	0.00		0.00	5,936,971.99
Item	59	1,541,592.40	0.00	0.00	1,541,592.40		0.00	0.00
Item	60	25,174,750.67	-25,174,750.67	0.00	0.00		0.00	0.00
Item	61	0.00	6,405,043.69	0.00	0.00		0.00	6,405,043.69
Item	62	0.00	46,010,886.06	0.00	44,057,265.25		0.00	1,953,620.81
Item	63	0.00	23,654,041.35	0.00	19,951,371.53		0.00	3,702,669.82
Item	64	0.00	10,027,703.70	0.00	5,716,497.22		0.0	4,311,206.48
Item	65	0.00	1,433,019.08	0.00	0.00		0.00	1,433,019.08
Item	66	0.00	3,847,983.25	0.00	0.00		0.00	3,847,983.25
Item	67	0.00	303,801.47	0.00	0.00		0.00	303,801.47
Item	68	0.00	3,013,556.83	0.00	0.00		0.00	3,013,556.83
Item	69	0.00	18,252,684.67	0.00	15,756,815.27		0.00	2,495,869.40
Item	70	0.00	1,657,156.16	0.00	0.00		0.00	1,657,156.16
Item	71	0.00	4,984,814.58	0.00	0.00		0.00	4,984,814.58
Item	72	0.00	1,387,452.96	0.00	0.00		0.00	1,387,452.96
Item	73	0.00	1,265,703.53	0.00	0.00		0.00	1,265,703.53
Item	74	0.00	3,008,997.57	0.00	0.00		0.00	3,008,997.57
Item	75	0.00	23,318,091.26	0.00	23,318,091.26		0.00	0.00
Item	76	0.00	8,873,981.06	0.00	0.00		0.00	8,873,981.06

— 237 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

			Increase in the current period	Increase in the current period	**Decrease in the **	current period	current period
			Internal			Carried over to
		Opening	development		Recognized as	current gains
Item		balance	costs	Others	intangible assets		and losses	Ending balance
Item	77	0.00	8,617,689.23	0.00	0.00		0.00	8,617,689.23
Item	78	0.00	1,674,109.17	0.00	0.00		0.00	1,674,109.17
Item	79	0.00	22,517,814.33	0.00	22,517,814.33		0.00	0.00
Item	80	0.00	304,953.40	0.00	0.00		0.00	304,953.40
Item	81	0.00	240,602.77	0.00	0.00		0.00	240,602.77
Item	82	0.00	12,148,622.91	0.00	0.00		0.00	12,148,622.91
Item	83	0.00	1,382,351.14	0.00	0.00		0.00	1,382,351.14
Item	84	0.00	19,413,485.26	0.00	19,413,485.26		0.00	0.00
Item	85	0.00	30,313,341.30	0.00	0.00		0.00	30,313,341.30
Item	86	0.00	50,184,839.36	0.00	34,865,019.72		0.00	15,319,819.64
Item	87	0.00	86,804,911.33	0.00	50,680,232.74		0.00	36,124,678.59
Item	88	0.00	31,356,086.37	0.00	31,194,812.93		0.00	161,273.44
Item	89	0.00	10,112,877.06	0.00	0.00		0.00	10,112,877.06
Item	90	0.00	8,219,583.06	0.00	0.00		0.00	8,219,583.06
Item	91	0.00	9,870,655.81	0.00	0.00		0.00	9,870,655.81
Item	92	0.00	1,632,968.01	0.00	0.00		0.00	1,632,968.01
Item	93	0.00	1,959,617.72	0.00	0.00		0.00	1,959,617.72
Item	94	0.00	19,231,194.02	0.00	19,231,194.02		0.00	0.00
Total		388,056,048.72	731,874,814.33	0.00	695,730,292.93		45,315.14	424,155,254.98

13. Goodwill

(1) Original book value of goodwill

Unit: RMB

Name of invested entity or matters forming goodwill Dongyang LeTV Flower Film & TV Co., Ltd. Total	Opening balance Increase in the current period Decrease in the current period 747,585,265.47 0.00 0.00 747,585,265.47	Ending balance 747,585,265.47
		747,585,265.47

(2) Provision for impairment of goodwill

At the end of the reporting period, the Company integrated the goodwill with relevant assets or asset groups and conducted an impairment test on them as a whole. Since there was no impairment, the Company did not make a provision for impairment.

— 238 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Deferred tax assets/deferred tax liabilities

2. (1) Deferred tax assets not offset

Unit: RMB

Item Unrealized profit of internal transaction Deductible loss Provision for bad debts Provision for inventory depreciation Provision for impairment of intangible assets Amortized interest of finance leases Total	Ending balance Deductible temporary difference Deferred tax assets 188,929,607.36 47,232,401.84 1,696,948,005.00 424,237,001.25 204,414,434.86 33,878,127.25 3,300,877.24 825,219.31 5,164,022.99 788,635.54 1,933,794.55 290,069.18 2,100,690,742.00 507,251,454.37	Opening balance Deductible temporary difference Deferred tax assets 0.00 0.00 722,231,799.92 180,132,496.65 87,566,926.40 14,776,335.61 4,850,053.09 1,212,513.27 554,697.13 97,236.66 0.00 0.00 815,203,476.54 196,218,582.19	Opening balance Deductible temporary difference Deferred tax assets 0.00 0.00 722,231,799.92 180,132,496.65 87,566,926.40 14,776,335.61 4,850,053.09 1,212,513.27 554,697.13 97,236.66 0.00 0.00 815,203,476.54 196,218,582.19
			196,218,582.19

(2) Deferred tax liabilities not offset

Unit: RMB

Item Accelerated depreciation of assets Unrealized loss of internal transaction Total	Ending balance Opening balance Taxable temporary differences Deferred tax liabilities Taxable temporary differences Deferred tax liabilities 9,343,861.95 1,401,579.29 0.00 0.00 33,921,882.92 5,088,282.44 0.00 0.00 43,265,744.87 6,489,861.73 0.00 0.00	Ending balance Opening balance Taxable temporary differences Deferred tax liabilities Taxable temporary differences Deferred tax liabilities 9,343,861.95 1,401,579.29 0.00 0.00 33,921,882.92 5,088,282.44 0.00 0.00 43,265,744.87 6,489,861.73 0.00 0.00
		0.00

— 239 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (3) Deferred tax assets or deferred tax liabilities presented with the net amount after offset

Unit: RMB

			Amount of		Amount of
			mutual offset		mutual offset
			between	Ending	between	Beginning
			deferred tax	balance of	deferred tax	balance of
			assets and	deferred tax	assets and	deferred tax
			deferred tax	assets or	deferred tax	assets or
			liabilities	deferred tax	liabilities at	deferred tax
			at the end of	liabilities	the beginning	liabilities
Item			the period	after offset	of the period	after offset
Deferred	tax	assets	507,251,454.37			196,218,582.19
Deferred	tax	liabilities	6,489,861.73

(4) Details of unrecognized deferred tax assets

Unit: RMB

Item			Ending balance	Opening balance
Deductible	temporary	difference	22,115.50	17,198.13
Deductible	loss		113,377,435.58	28,260,474.26
Total			113,399,551.08	28,277,672.39

(5) Deductible loss of unrecognized deferred tax assets will mature in the following years

Unit: RMB

		Amount at the
	Amount at the	beginning of the
Year	end of the period	period	Notes
2015	0.00	428,676.12
2016	43,294.74	43,294.74
2017	1,394.51	1,394.51
2018	5,500,242.67	5,500,242.67
2019	22,286,866.22	22,286,866.22
2020	85,545,637.44	0.00
Total	113,377,435.58	28,260,474.26	—

— 240 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

15. Other non-current assets

Item Advance payment of royalties Total 16. Short-term loans Item Pledged loan Mortgaged loan Guaranteed loan Debt of honour Total 17. Notes payable Classification Commercial acceptance bill Bank acceptance bill Total 18. Accounts payable (1) Presentation of accounts payable Item Payables for goods Royalties payable Total	Ending balance 511,528,626.09 511,528,626.09 Ending balance 0.00 0.00 1,635,000,000.00 100,000,000.00 1,735,000,000.00 Ending balance 0.00 0.00 0.00 Ending balance 2,131,714,086.77 1,099,029,236.09 3,230,743,322.86	Unit: RMB Opening balance 230,797,275.71 230,797,275.71 Unit: RMB Opening balance 0.00 0.00 1,318,000,000.00 70,000,000.00
		1,388,000,000.00
		Unit: RMB Opening balance 0.00 20,000,000.00 20,000,000.00 Unit: RMB Opening balance 842,473,525.36 762,816,036.13
		1,605,289,561.49

— 241 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

(2) Important accounts payable with an age of over one year

Unit: RMB

Item Ending balance Reasons for not being paid off or carried forward H&R Century Pictures Co., Ltd. 45,000,000.00 Not settled within the payment term Le Vision Pictures (Beijing) Co., Ltd. 38,833,500.00 Not settled within the payment term Le Vision Pictures (Tianjin) Co., Ltd. 35,500,000.00 Not settled within the payment term Total 119,333,500.00 — 19. Advance receipts Unit: RMB Item Ending balance Opening balance Payment for commodities received in advance 1,700,093,624.66 186,817,357.04 Royalties received in advance 32,982,626.15 136,578,250.00 Total 1,733,076,250.81 323,395,607.04 20. Remuneration payable to employees (1) Presentation of remuneration payable to employees Unit: RMB Item Opening balance Increase in the current period Decrease in the current period Ending balance I. Short-term remuneration 2,777,915.84 964,340,892.73 963,337,228.47 3,781,580.10 II. Post-employment benefit - defined contribution plan 231,216.68 112,688,083.36 111,543,203.03 1,376,097.01 III. Termination benefit 0.00 0.00 0.00 0.00 IV. Other benefits maturing within one year 0.00 0.00 0.00 0.00 Total 3,009,132.52 1,077,028,976.09 1,074,880,431.50 5,157,677.11	Item Ending balance Reasons for not being paid off or carried forward H&R Century Pictures Co., Ltd. 45,000,000.00 Not settled within the payment term Le Vision Pictures (Beijing) Co., Ltd. 38,833,500.00 Not settled within the payment term Le Vision Pictures (Tianjin) Co., Ltd. 35,500,000.00 Not settled within the payment term Total 119,333,500.00 — 19. Advance receipts Unit: RMB Item Ending balance Opening balance Payment for commodities received in advance 1,700,093,624.66 186,817,357.04 Royalties received in advance 32,982,626.15 136,578,250.00 Total 1,733,076,250.81 323,395,607.04 20. Remuneration payable to employees (1) Presentation of remuneration payable to employees Unit: RMB Item Opening balance Increase in the current period Decrease in the current period Ending balance I. Short-term remuneration 2,777,915.84 964,340,892.73 963,337,228.47 3,781,580.10 II. Post-employment benefit - defined contribution plan 231,216.68 112,688,083.36 111,543,203.03 1,376,097.01 III. Termination benefit 0.00 0.00 0.00 0.00 IV. Other benefits maturing within one year 0.00 0.00 0.00 0.00 Total 3,009,132.52 1,077,028,976.09 1,074,880,431.50 5,157,677.11	Item Ending balance Reasons for not being paid off or carried forward H&R Century Pictures Co., Ltd. 45,000,000.00 Not settled within the payment term Le Vision Pictures (Beijing) Co., Ltd. 38,833,500.00 Not settled within the payment term Le Vision Pictures (Tianjin) Co., Ltd. 35,500,000.00 Not settled within the payment term Total 119,333,500.00 — 19. Advance receipts Unit: RMB Item Ending balance Opening balance Payment for commodities received in advance 1,700,093,624.66 186,817,357.04 Royalties received in advance 32,982,626.15 136,578,250.00 Total 1,733,076,250.81 323,395,607.04 20. Remuneration payable to employees (1) Presentation of remuneration payable to employees Unit: RMB Item Opening balance Increase in the current period Decrease in the current period Ending balance I. Short-term remuneration 2,777,915.84 964,340,892.73 963,337,228.47 3,781,580.10 II. Post-employment benefit - defined contribution plan 231,216.68 112,688,083.36 111,543,203.03 1,376,097.01 III. Termination benefit 0.00 0.00 0.00 0.00 IV. Other benefits maturing within one year 0.00 0.00 0.00 0.00 Total 3,009,132.52 1,077,028,976.09 1,074,880,431.50 5,157,677.11	Item Ending balance Reasons for not being paid off or carried forward H&R Century Pictures Co., Ltd. 45,000,000.00 Not settled within the payment term Le Vision Pictures (Beijing) Co., Ltd. 38,833,500.00 Not settled within the payment term Le Vision Pictures (Tianjin) Co., Ltd. 35,500,000.00 Not settled within the payment term Total 119,333,500.00 — 19. Advance receipts Unit: RMB Item Ending balance Opening balance Payment for commodities received in advance 1,700,093,624.66 186,817,357.04 Royalties received in advance 32,982,626.15 136,578,250.00 Total 1,733,076,250.81 323,395,607.04 20. Remuneration payable to employees (1) Presentation of remuneration payable to employees Unit: RMB Item Opening balance Increase in the current period Decrease in the current period Ending balance I. Short-term remuneration 2,777,915.84 964,340,892.73 963,337,228.47 3,781,580.10 II. Post-employment benefit - defined contribution plan 231,216.68 112,688,083.36 111,543,203.03 1,376,097.01 III. Termination benefit 0.00 0.00 0.00 0.00 IV. Other benefits maturing within one year 0.00 0.00 0.00 0.00 Total 3,009,132.52 1,077,028,976.09 1,074,880,431.50 5,157,677.11
		323,395,607.04
			Unit: RMB Ending balance 3,781,580.10 1,376,097.01 0.00 0.00
	1,074,880,431.50		5,157,677.11

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APPENDIX II

• (2) Presentation of short-term remuneration

Item 1. Salary, bonus, subsidy and grant 2. Employee welfare 3. Social insurance premium Including: medical insurance Work-related injury insurance premium Childbearing insurance premium 4. Housing provident fund 5. Trade union fee and staff education fee 6. Short-term compensated absences Total	Opening balance 2,564,876.36 0.00 10,654.56 0.00 5,639.35 5,015.21 202,384.92 0.00 0.00 2,777,915.84	Increase in the current period Decrease in the current period 818,715,572.56 818,940,464.21 19,301,518.35 19,301,518.35 60,478,797.82 59,689,974.91 53,748,052.57 53,062,533.84 2,397,308.79 2,345,810.68 4,333,436.46 4,281,630.39 65,521,104.00 65,081,371.00 323,900.00 323,900.00 0.00 0.00 964,340,892.73 963,337,228.47	Unit: RMB Ending balance 2,339,984.71 0.00 799,477.47 685,518.73 57,137.46 56,821.28 642,117.92 0.00 0.00
			3,781,580.10

(3) Presentation of defined contribution plan

Item 1. Basic endowment insurance 2. Unemployment insurance premium 3. Payment of enterprise annuity Total	Opening balance 200,860.93 30,355.75 0.00 231,216.68	Increase in the current period 107,018,267.40 5,669,815.96 0.00 112,688,083.36	Decrease in the current period 105,960,443.96 5,582,759.07 0.00 111,543,203.03	Unit: RMB Ending balance 1,258,684.37 117,412.64 0.00
				1,376,097.01

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APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

21. Taxes and fees payable

Unit: RMB

Item	Ending balance	Opening balance
VAT	240,799,575.51	155,691,573.10
Business tax	0.00	988,886.39
Enterprise income tax	174,595,458.42	128,337,553.73
Personal income tax	65,904,242.49	80,921,820.09
Municipal maintenance and construction tax	2,452,731.57	3,987,887.68
Education surcharge	2,037,505.71	718,906.53
Construction fee for cultural undertakings	90,335,129.65	38,497,869.24
Others	1,425,129.01	613,134.46
Total	577,549,772.36	409,757,631.22

22. Interest payable

			Unit: RMB
Item		Ending balance	Opening balance
Interest	rate on debenture	50,211,693.53	15,200,173.46
Interest	payable of short-term loans	2,433,512.85	0.00
Total		52,645,206.38	15,200,173.46

Note: There was no outstanding interest at the end of the period

23. Other payables

			Unit: RMB
Item		Ending balance	Opening balance
Current	account	11,729,115.37	21,399,563.73
Margin	and deposit	3,518,213.52	5,722,870.27
Others		4,123,363.97	227,236.91
Total		19,370,692.86	27,349,670.91

Note: This year, there was no important other payables with an age of over one year.

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APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

1. Non-current liabilities maturing within one year

			Unit: RMB
Item		Ending balance	Opening balance
Long-term loans maturing within one year		0.00	16,700,000.00
Bonds payable maturing within one year		0.00	285,000,000.00
Long-term payables maturing within one year		92,405,533.66	90,100,262.20
Deferred earnings maturing within one year		6,570,167.91	9,347,908.80
Total		98,975,701.57	401,148,171.00
25.	Other current liabilities
			Unit: RMB
Item		Ending balance	Opening balance
Short-term bonds payable		0.00	199,606,666.61
Total			199,606,666.61
	Increase and decrease of short-term bonds payable:
			Unit: RMB

Bond name Face value Date of issue Bond duration RMB200 million short-term bonds of PingAn Bank 200,000,000.00 2014/6/27 1 year Total — — —	Amount issued 200,000,000.00 200,000,000.00	Opening balance Issuance in the current period 199,606,666.61 0.00 199,606,666.61 0.00	Accrued interest based on face value A 6,883,333.31 6,883,333.31	mortization of the premiums and discounts 393,333.39 393,333.39	Repayment in the current period 200,000,000.00	Balance at the end of the period 0.00
					200,000,000.00	0.00

— 245 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

26. Long-term loans

• (1) Classification of long-term loans

Unit: RMB

Item	Ending balance	Opening balance
Pledged loan	0.00	0.00
Mortgaged loan	0.00	0.00
Guaranteed loan	300,000,000.00	0.00
Credit loan	0.00	0.00
Total	300,000,000.00

Note: There was no matured & outstanding long-term loans at the end of the year.

27. Bonds payable

(1) Bonds payable

Unit: RMB

Item	Ending balance	Opening balance
15 Letv 01	985,463,963.74	0.00
15 Letv 02	915,094,386.86	0.00
Total	1,900,558,350.60

• (2) Increase and decrease of bonds payable (excluding preferred stocks, perpetual bonds and other financial instruments classified as financial liabilities)

Unit: RMB

						Issuance	Accrued	Amortization	Repayment
						in the	interest	of the	in the
	Face	Date	Bond	Amount	Opening	current	based on	premiums and	current	Ending
Bond name	value	of issue	duration	issued	balance	period	face value	discounts	period	balance
15 Letv 01	1,000,000,000.00	2015/8/3	2+1 year	982,000,000.00	0.00	982,000,000.00	34,274,193.55	3,463,963.74	0.00	985,463,963.74
15 Letv 02	930,000,000.00	2015/9/23	2+1 year	913,260,000.00	0.00	913,260,000.00	15,937,500.00	1,834,386.86	0.00	915,094,386.86
Total	—	—	—	1,895,260,000.00	0.00	1,895,260,000.00	50,211,693.55	5,298,350.60	0.00	1,900,558,350.60

— 246 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Long-term payables

2. (1) Presentation of long-term payables by nature of payment

Unit: RMB

Item	Ending balance	Opening balance
Finance lease of sale-leaseback of equipment	27,174,449.21	60,051,607.49
Finance lease equipment	9,537,133.48	25,836,034.64
Unrecognized finance costs	-2,152,092.82	-4,013,818.45
Total	34,559,489.87	81,873,823.68
Other descriptions:

1. Deferred earnings

Item Opening balance Unrealized sale-leaseback gains/losses 6,231,939.27 Total 6,231,939.27 30. Other non-current liabilities Item Loan of Jia Yueting Loan of Jia Yuefang Total	Increase in the current period 1,014,685.93 1,014,685.93	Unit: RMB Decrease in the current period Ending balance Forming reason 6,689,044.75 557,580.45 Unrealized sale-leaseback gains/losses formed by sales type finance lease 6,689,044.75 557,580.45 — Unit: RMB Ending balance Opening balance 2,070,600,718.00 0.00 1,401,735,654.62 1,015,568,661.50 3,472,336,372.62 1,015,568,661.50	Unit: RMB Decrease in the current period Ending balance Forming reason 6,689,044.75 557,580.45 Unrealized sale-leaseback gains/losses formed by sales type finance lease 6,689,044.75 557,580.45 — Unit: RMB Ending balance Opening balance 2,070,600,718.00 0.00 1,401,735,654.62 1,015,568,661.50 3,472,336,372.62 1,015,568,661.50
			1,015,568,661.50

— 247 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

31. Share capital

Unit: RMB

Increase/decrease in the current period (+, -)

Issuance Opening of new Bonus Transfer from balance shares shares capital reserves Others Subtotal Ending balance Total shares 841,190,063.00 0.00 0.00 1,009,428,075.00 5,397,020.00 1,014,825,095.00 1,856,015,158.00

Other descriptions:

• Note: The Company’s share capital increased by a total of 1,014,825,095 shares. The reason is that in April 2015, the Company, according to the resolution of the general meeting and amended articles of association in 2014, issued 12 new shares for every 10 shares to all shareholders through funding from its capital reserve, totalling 1,009,428,075 shares; in June 2015, through private placement of corporate shares, the Company issued to 319 incentive targets a total of 5,397,020 stock options which can be exercised in the first exercise period, equivalent to 5,397,020 new shares.

32. Capital reserve

Unit: RMB

Item Capital premium (share premium) Other capital reserve Total	Opening balance 1,228,744,936.99 137,273,590.79 1,366,018,527.78	Increase in the current period 68,032,871.57 168,045,271.68 236,078,143.25	Decrease in the current period Ending balance 1,009,428,075.00 287,349,733.56 43,519,606.73 261,799,255.74 1,052,947,681.73 549,148,989.30	Decrease in the current period Ending balance 1,009,428,075.00 287,349,733.56 43,519,606.73 261,799,255.74 1,052,947,681.73 549,148,989.30
				549,148,989.30

Other descriptions, including increase/decrease in the current period and relevant reasons:

• Note: This year, the share premium increased by RMB68,032,871.57, which was attributable to the premium generated by exercise of share-based payment at maturity. Other capital reserves increased by RMB168,045,271.68, among which, RMB118,133,082.89 was the capital reserve increased by interests of unpaid loans from the controlling shareholder and associated natural person of the Company which was accounted as equity transaction; RMB49,912,188.79 was the capital reserve increased by costs generated by share-based payment in the vesting period. This year, the share premium decreased by RMB1,009,428,075.00, which was the amount of shares issued by the Company in April 2015 to all shareholders (12 new shares for every 10 shares) through funding from its capital reserve according to the resolution of the general meeting and amended articles of association in 2014. This year, other capital reserves decreased by RMB43,519,606.73, which was the expense in the original vesting period for exercise of share-based payment at maturity this year carried forward from other capital reserves to share premium.

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

33. Other consolidated revenue

Unit: RMB

			**Amount incurred in the current **	**Amount incurred in the current **	period
			Less: Those
			included
			in other
			consolidated
			income in the
			previous period
			but transferred		The amount
			into the		after tax		The amount
		Pre-tax	profit or loss		attributed		after tax
		amount in	in the	Less:	to the		attributed
		the current	current	Income	parent		to minority
Item	Opening balance	period	period	tax expense	company		**shareholders **	Ending balance
Gains/losses from
change in fair value
of available-for-sale
financial assets	0.00	5,072,950.59	0.00	0.00		0.00	0.00	5,072,950.59
Translation difference
of foreign-currency
financial statements	-706,643.49	23,470,836.14	0.00	0.00		0.00	0.00	22,764,192.65
Other consolidated
revenue	-706,643.49	28,543,786.73	0.00	0.00		0.00	0.00	27,837,143.24

34. Surplus reserve

Item Statutory surplus reserve Discretionary surplus reserve Total	Opening balance Increase in the current period Decrease in the current period 116,965,360.22 62,200,008.93 0.00 0.00 0.00 0.00 116,965,360.22 62,200,008.93 0.00	Unit: RMB Ending balance 179,165,369.15 0.00
		179,165,369.15

Description about surplus reserve, including increase/decrease in the current period and relevant reasons:

Note: The surplus reserve in the current period increased by RMB62,200,008.93, which was the statutory surplus reserve withdrawn according to 10% of the net profit of the parent company of the Group.

— 249 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

35. Undistributed profits

Unit: RMB

Item	Current period	Last period
Undistributed profits in the last period before
adjustment	843,360,350.78	559,040,213.83
Total undistributed profits at the beginning of the
adjustment period (increase +, decrease -)	0.00	0.00
Undistributed profits in the later adjustment
period	843,360,350.78	559,040,213.83
Add: Net profit attributable to owners of the
parent company in the current period	573,027,173.33	364,029,509.12
Less: Statutory surplus reserve	62,200,008.93	53,360,002.39
Common stock dividends payable	38,694,742.90	26,349,369.78
Undistributed profits at the end of the period	1,315,492,772.28	843,360,350.78

36. Operating revenue and cost

Unit: RMB

Item		**Amount incurred in **	the current period	**Amount incurred **	in the last period
		Revenue	Cost	Revenue	Cost
Main	business	13,016,725,124.12	11,112,009,123.84	6,818,938,622.38	5,828,133,468.42
Total		13,016,725,124.12	11,112,009,123.84	6,818,938,622.38	5,828,133,468.42

37. Business taxes and surcharges

Unit: RMB

	Amount incurred in	Amount incurred in
Item	the current period	the last period
Business tax	0.00	3,039,657.58
Municipal maintenance and construction tax	5,590,483.52	3,115,182.21
Education surcharge	2,896,010.41	1,434,631.81
Local education surcharge	1,347,243.20	1,062,164.15
Construction fee for cultural undertakings	84,196,401.81	47,962,602.59
Others	650,690.17	234,632.08
Total	94,680,829.11	56,848,870.42

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

38. Sales expenses

Unit: RMB

	Amount incurred in	Amount incurred in
Item	the current period	the last period
Advertising production expenses	202,228,129.87	156,529,979.27
Expenses on profit-sharing among members	326,176,820.75	0.00
Expenses for logistics and after-sales service	218,474,543.31	131,512,008.98
Salary and welfare	211,311,497.17	121,268,879.77
Office and conference expenses	21,341,290.04	11,402,974.34
Consulting service expenses	17,141,428.80	18,495,103.11
Depreciation and rental fees	11,834,500.89	10,141,820.28
Travelling expenses	10,932,099.09	9,084,418.27
Social engagement expenses	10,379,167.90	5,176,625.74
Equity incentive fees	7,486,386.17	19,840,824.02
Transportation and vehicle expenses	1,911,436.87	1,911,032.82
Service fees	1,509,888.76	3,512,686.58
Others	9,588.73	159,112.31
Total	1,040,736,778.35	489,035,465.49

39. Administrative expenses

		Unit: RMB
	Amount incurred in	Amount incurred in
Item	the current period	the last period
Salary and welfare	139,523,984.32	78,263,936.32
Equity incentive fees	17,871,985.33	26,681,631.05
Depreciation, amortization and rental fees	83,581,850.38	33,094,899.09
Office and conference expenses	21,155,980.51	11,683,335.84
Consulting fee	26,389,184.25	11,152,380.11
Travelling expenses	6,665,475.44	6,704,652.90
Taxes	7,965,779.35	1,748,861.57
Social engagement expenses	2,373,206.93	2,969,042.00
Communication expenses	1,402,540.16	1,099,043.94
Service fees	1,670,708.60	1,326,642.24
Others	891,399.95	730,227.54
Total	309,492,095.22	175,454,652.60

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

40. Financial expense

Unit: RMB

	Amount incurred in	Amount incurred in
Item	the current period	the last period
Interest expenses	284,322,482.32	151,285,869.65
Less: interest revenue	6,185,426.25	3,514,224.90
Net interest expenses	278,137,056.07	147,771,644.75
Exchange loss	23,660,829.57	2,078,055.06
Less: Exchange revenue	2,210,424.01	812,481.07
Net exchange loss	21,450,405.56	1,265,573.99
Platform fees	43,202,551.00	16,690,259.90
Commission and others	6,189,586.45	2,188,017.14
Total	348,979,599.08	167,915,495.78

1. Assets impairment loss

				Unit: RMB
			Amount incurred in	Amount incurred in
Item			the current period	the last period
I.	Bad	debt loss	116,852,425.91	48,284,504.53
II.	Loss	from inventory depreciation	3,300,877.24	4,850,053.09
XII.	Loss	from impairment of intangible assets	0.00	554,697.13
Total			120,153,303.15	53,689,254.75

— 252 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

42. Investment revenue

		Unit: RMB
	Amount incurred in	Amount incurred in
Items	the current period	the previous period
Revenue from long-term equity investment stated
by equity method	45,254.04	-80,695.41
Revenue from disposal of long-term equity
investment	0.00	-238,038.46
Revenue from holding financial assets measured
at fair value with changes stated as current
gains/losses	0.00	0.00
Revenue from disposing financial assets
measured at fair value with changes stated as
current gains/losses	0.00	0.00
Revenue from holding held-to-maturity
investment	0.00	0.00
Revenue from holding available-for-sale financial
assets	0.00	0.00
Revenue from disposing available-for-sale
financial assets	14,165,684.11	0.00
Gains of remaining equity re-measured at fair
value after control right loss	64,524,252.87	0.00
Investment revenue from bank financial product	14,246.58	323,772.31
Total	78,749,437.60	5,038.44

— 253 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

43. Non-operating revenue

Unit: RMB

			Amount stated as
			non-recurring
	Amount incurred	Amount incurred	gains/losses in
	in the current	in the previous	the current
Items	period	period	period
Total gains from disposal of
non-current assets			0.00
Including: Gains from disposal of fixed
assets	0.00	0.00	0.00
Gains from disposal of intangible
assets	0.00	0.00	0.00
Gains from debt restructuring	0.00	0.00	0.00
Gains from exchange of non-monetary
assets	0.00	0.00	0.00
Donations received	0.00	0.00	0.00
Government subsidies	44,987,578.52	27,461,470.74	44,987,578.52
Others	334.44	94,878.35	334.44
Total	44,987,912.96	27,556,349.09	44,987,912.96

Government subsidies stated as current gains/losses:

Unit: RMB

				Did the
				subsidies
				have an
				effect on	Were the	Amount incurred		Pertinent to
		Reason for		profits/	subsidies	in the	Amount incurred	assets/
	Issuing	issuing the		losses of the	special	current	in the	Pertinent to
Subsidy items	body	subsidies	Nature	year	subsidies	period	previous period	revenue
Government subsidies for
cross-industry big data services
based on multimedia development								Pertinent to
cloud platform						15,000,000.00	2,000,000.00	revenue
Major application demonstration
project of Zhongguancun Industrial								Pertinent to
Technology Alliance						465,000.00	1,110,000.00	revenue
“Ten Hundred Thousand” Project of
the Management Committee of
Zhongguancun Science and								Pertinent to
Technology Park						500,000.00	2,250,000.00	revenue

— 254 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Subsidy items Issuing body Reason for issuing the subsidies Nature Did the subsidies have an effect on profits/ losses of the year Were the subsidies special subsidies Am 2015 commercial circulation development project of Beijing Municipal Commission of Commerce Special funds for key enterprises of Zhongguancun Haidian Park Management Committee Cultural and creative industry subsidies of State-owned Cultural Assets Supervision and Administration Office of Beijing Municipality Technological innovation award (for patent) of Capital Intellectual Property Services Association Reward funds of Beijing Municipal Bureau of Press, Publication, Radio, Film and Television Technical subsidies from Tianjin Technology Development Bureau Financial aids for Sino-Singapore Tianjin Eco-city Special funds for film & TV cultural industry development (tax return) Water conservancy funds of Dongyang Municipal Local Taxation Bureau Support funds from Beijing Zhongguancun Enterprises Credit Promotion Association Subsidies from Party Committee of Beijing Internet Association Patent subsidies Funds supporting informatization development projects in Beijing Subsidies for 2014 National Torch Program Total — — — — —

ount incurred in the current period Amount incurred in the previous period Pertinent to assets/ Pertinent to revenue 2,314,000.00 0.00 Pertinent to revenue 2,940,000.00 2,430,000.00 Pertinent to revenue 400,000.00 0.00 Pertinent to revenue 9,100.00 53,440.00 Pertinent to revenue 250,000.00 550,000.00 Pertinent to revenue 100,000.00 5,000.00 Pertinent to revenue 100,668.52 223,264.74 Pertinent to revenue 22,764,910.00 13,579,766.00 Pertinent to revenue 143,900.00 0.00 Pertinent to revenue 0.00 10,000.00 Pertinent to revenue 0.00 20,000.00 Pertinent to revenue 0.00 230,000.00 Pertinent to revenue 0.00 3,000,000.00 Pertinent to revenue 0.00 2,000,000.00 Pertinent to revenue 44,987,578.52 27,461,470.74 —

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APPENDIX II

44. Non-operating expenses

Unit: RMB

			Amount stated as
			non-recurring
	Amount incurred	Amount incurred	gains/losses
	in the current	in the previous	in the current
Items	period	period	period
Total losses from disposal of
non-current assets	37,634,806.94	474,357.08	37,634,806.94
Including: Loss on disposal of fixed
assets	0.00	474,357.08	0.00
Loss on disposal of intangible assets	37,634,806.94	0.00	37,634,806.94
Loss on debt restructuring	0.00	0.00	0.00
Loss on exchange of non-monetary
assets	0.00	0.00	0.00
External donations	2,000,000.00	42,293.29	2,000,000.00
Others	606,716.90	2,007,047.24	606,716.90
Total	40,241,523.84	2,523,697.61	40,241,523.84

1. Income tax expenses

2. (1) Detailed income tax expenses

Unit: RMB

	Amount incurred in	Amount incurred in
Items	the current period	the previous period
Income tax expenses of the current period	161,595,406.98	113,229,328.80
Deferred income tax expenses	-304,543,010.45	-169,126,784.84
Total	-142,947,603.47	-55,897,456.04

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APPENDIX II

• (2) Adjustment process of accounting profit and income tax expenses

Unit: RMB

	Amount incurred in
Items	the current period
Total profits	74,169,222.09
Income tax expenses calculated as per legal/applicable tax rate	11,125,383.31
Influence of applying different tax rates to subsidiaries	-100,921,882.08
Influence of income tax adjustment in previous periods	1,790,455.55
Influence of non-taxable revenue	-5,733,990.61
Influence of nondeductible costs, expenses and losses	7,698,456.25
Influence of deductible losses of deferred income tax assets unrecognized
in previous periods	-17,397.95
Influence of deductible temporary differences or deductible losses of
deferred income tax assets unrecognized in the current period	-18,263,852.04
Influence of extra deduction allowed by tax law	-38,624,775.90
Income tax expenses	-142,947,603.47

46. Other consolidated revenue

See Note “X. 33 Other Consolidated Revenue” for details.

47. Items of cash flow statement

• (1) Other cash received relating to operating activities

		Unit: RMB
	Amount incurred in	Amount incurred in
Items	the current period	the previous period
Current account	59,978,371.90	104,177,304.78
Government subsidies	44,987,578.52	27,461,470.74
Interest revenue	6,180,571.19	3,514,224.90
Others	2,138,538.22	3,984,660.82
Total	113,285,059.83	139,137,661.24

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FINANCIAL INFORMATION OF LESHI INTERNET

• (2) Other cash paid relating to operating activities

Unit: RMB

	Amount incurred in	Amount incurred in	Amount incurred in
Items	**the **	current period	the previous period
Advertising production expenses		158,826,157.33	110,719,158.29
Expenses on profit-sharing among members		326,176,820.75	0.00
Warehousing and logistics expenses		201,344,230.95	104,158,964.18
Consulting service expenses		55,562,597.59	22,269,434.31
Office and conference expenses		38,420,439.67	21,169,326.01
Rental fees		33,266,759.18	23,311,235.74
Travelling expenses		15,221,393.33	15,620,870.33
Social engagement expenses		12,166,298.55	8,094,838.40
Transportation and vehicle expenses		5,585,450.29	4,180,298.92
Current account		12,720,519.01	96,418,539.66
Others		8,551,478.80	16,072,616.96
Total		867,842,145.45	422,015,282.80
(3) Other cash paid relating to investing activities
			Unit: RMB
	Amount incurred in		Amount incurred in
Items	**the **	current period	the previous period
Purchase of financial products		60,000,000.00	0.00
Withheld and remitted individual income tax for
dividends to shareholders		25,200,000.00	0.00
Ending monetary funds (nonconsolidated) of
LeTV Sports		4,533,291.83	0.00
Charges for capital increase of subsidiaries		0.00	3,912.09
Total		89,733,291.83	3,912.09
(4) Other cash received relating to fundraising activities
			Unit: RMB
	Amount incurred in		Amount incurred in
Items	**the **	current period	the previous period
Discounted notes receivable within consolidation
scope		340,933,888.89	0.00
Investment funds of The Legend of Miyue		60,000,000.00	0.00
Total		400,933,888.89	0.00

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APPENDIX II

• (5) Other cash paid relating to fundraising activities

			Unit: RMB
	Amount incurred in		Amount incurred in
Items	**the **	current period	the previous period
Finance lease funds		27,185,078.74	27,529,193.63
Investor distribution funds		107,111,423.13	0.00
Total		134,296,501.87	27,529,193.63
48. Supplementary information for cash flow statement
(1) Supplementary information for cash flow statement

Unit: RMB

		Amount in the	Amount in the
Supplementary Information		current period	previous period
1.	Reconciliation of net profit to cash flows
	from operating activities:	—	—
	Net profit	217,116,825.56	128,796,560.88
	Plus: Provision for assets impairment	120,153,303.15	53,689,254.75
	Depreciation of fixed assets, depletion of
	oil and gas assets, and depreciation of
	productive biological assets	113,574,965.71	46,692,204.24
	Amortization of intangible assets	1,526,123,746.11	1,032,639,064.94
	Amortization of long-term expenses to be
	amortized	943,669.21	317,023.31
	Loss on disposal of fixed assets, intangible
	assets and other long-term assets (“-” for
	gains)	37,634,806.94	0.00
	Loss on scrapping of fixed assets (“-” for
	gains)	0.00	0.00
	Loss on changes in fair value (“-” for
	gains)	0.00	0.00
	Financial expenses (“-” for gains)	284,322,482.32	151,285,869.65
	Investment loss (“-” for gains)	-78,749,437.60	-5,038.44
	Decrease in deferred income tax assets (“-”
	for increase)	-311,032,872.18	-169,126,784.83
	Increase in deferred income tax liabilities
	(“-” for decrease)	6,489,861.73	0.00
	Decrease of inventory (“-” for increase)	-403,711,270.53	-471,152,317.73

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APPENDIX II

		Amount in the	Amount in the
Supplementary Information		current period	previous period
	Decrease in operating receivables (“-” for
	increase)	-4,226,975,861.15	-1,602,441,439.73
	Increase in operating payables (“-” for
	decrease)	3,555,649,118.10	994,837,302.93
	Others	34,162,539.09	68,651,033.99
	Net amount of cash flow from operating
	activities	875,701,876.46	234,182,733.96
2.	Major investing and fundraising activities
	that do not involve cash receipts and
	payments:	—	—
	Debts converted to capital	0.00	0.00
	Convertible corporate bonds maturing
	within one year	0.00	0.00
	Fixed assets under finance lease	48,273,329.93	198,488,283.63
3.	Net changes in cash and cash equivalents:	—	—
	Ending balance of cash	2,714,778,115.14	447,348,595.63
	Less: Opening balance of cash	447,348,595.63	585,718,105.29
	Plus: Ending balance of cash equivalents	0.00	0.00
	Less: Opening balance of cash equivalents	0.00	0.00
	Net increase in cash and cash equivalents	2,267,429,519.51	-138,369,509.66
(2)	Composition of cash and cash equivalents
			Unit: RMB
Items		Ending balance	Opening balance
I.	Cash	2,714,778,115.14	447,348,595.63
	Including: Cash on hand	189,596.70	1,320,234.22
	Bank deposit ready for payment any time	2,714,588,518.44	446,028,361.41
	Other monetary funds ready for payment
	any time	0.00	0.00
	Deposits with Central Bank for payment	0.00	0.00
	Deposits with banks and other financial
	institutions	0.00	0.00
	Placements with banks and other financial
	institutions	0.00	0.00
II.	Cash equivalents	0.00	0.00
	Including: Bond investments maturing
	within three months	0.00	0.00

— 260 —

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FINANCIAL INFORMATION OF LESHI INTERNET

Items	Items	Ending balance	Opening balance
III.	Ending balance of cash and cash
	equivalents	2,714,778,115.14	447,348,595.63
	Including: Cash and cash equivalents
	restrictedly used in the parent company or
	subsidiaries	0.00	0.00

1. Notes to items in the statement of changes in owners’ equity

Explain “other” adjustments to the ending balance of last year and amounts thereof:

• (1) Nature and amount of “other” adjustments to the ending amount of last year

None.

• (2) Capital reserve — others in the statement of changes in owners’ equity in the current period refers to the capital reserve increased because of the RMB118,133,082.89 of interest withdrawn for equity transaction in the current period for the RMB3,472,336,372.62 of loan voluntarily offered to the Company by Jia Yueting and Jia Yuefang.

• Assets with restricted ownership or right of use

Unit: RMB

Items		Ending book value	Reason for restriction
Monetary	funds	15,000,000.00 Deposit for bank acceptance bill
Total		15,000,000.00	—

1. Foreign currency monetary items

2. (1) Foreign currency monetary items

Unit: RMB

	Ending foreign		Ending balance of
Items	currency balance	Exchange rate	converted RMB
Monetary funds	—	—	14,217,505.63
Including: US dollar	1,309,651.40	6.4936	8,504,352.33
Hong Kong dollar	6,819,395.66	0.83778	5,713,153.30
Accounts receivable	—	—	2,664,007.95
Including: US dollar	0.00	6.4936	0.00

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APPENDIX II

	Ending foreign		Ending balance of
Items	currency balance	Exchange rate	converted RMB
Hong Kong dollar	3,179,841.90	0.83778	2,664,007.95
Other receivables			353,176,360.74
Including: US dollar	424,844.13	6.4936	2,758,767.84
Hong Kong dollar	418,269,226.89	0.83778	350,417,592.90
Accounts prepaid			19,406,226.83
Including: US dollar	0.00	6.4936	0.00
Hong Kong dollar	23,163,869.79	0.83778	19,406,226.83

• (2) Description of overseas business entities; for material overseas business entities, disclose their major business places overseas, recording currency and the selection criterion thereof; should there be any change in the recording currency, disclose the reason for such change.

□ Applicable � Not applicable

VIII.Change of consolidation scope

1. Change in consolidation scope for other reasons

Explain change in consolidated scope for other reasons (e.g. new establishment or liquidation of subsidiaries) and relevant details:

As announced by the Company on May 4th, 2015, “To further enhance the comprehensive competitiveness of LeTV Sports Culture Development (Beijing) Co., Ltd. (hereinafter referred to as “LeTV Sports”) and reduce the possible adverse effect of the business on the operating results of the listed company, the management of the Company, after careful consideration, decided to optimize the shareholder structure of LeTV Sports by adjusting the shareholding ratio of LeTV Sports, increasing the capital investment of controlling shareholders, encouraging team members to hold shares and attracting more shareholders rich in industry experience to increase capital.” After the said adjustment in shareholder structure of LeTV Sports, as at December 31st, 2015 the Company held 10.34% of shares of LeTV Sports, which means it no longer has control right or significant influence on LeTV Sports. So LeTV Sports was excluded from the consolidation scope.

In June 2015 the Company newly established a wholly-owned subsidiary Khorgos Lehai Culture Media Co., Ltd., which was included in the consolidation scope this year.

In March 2015 the Company newly established a wholly-owned subsidiary Lexiang Holdings Co., Ltd., which was included in the consolidation scope this year.

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APPENDIX II

IX. Equity in other bodies

1. Equity in subsidiaries

(1) Constitution of the enterprise group

	Main			Shareholding ratio	Shareholding ratio	Method of
Name of subsidiary	**business place **	Registered in	Business nature	Direct	Indirect	obtainment
LeTV Information	Tianjin	Tianjin	IT	100.00%		Investment
Technology (Tianjin) Co.,
Ltd.
Beijing LeTV Streaming	Beijing	Beijing	Advertising	100.00%		Investment
Media Advertising Co.,
Ltd.
Letv Information Technology	Hong Kong	Hong Kong	IT	100.00%		Investment
(Hong Kong) Co., Ltd.
LeTV Information	Shanghai	Shanghai	IT	100.00%		Investment
Technology (Shanghai) Co.,
Ltd.
Leshi Zhixin Electronic	Tianjin	Tianjin	Production and	58.55%		Investment
Technology (Tianjin)			sales of products
Limited
LeTV Cultural Development	Beijing	Beijing	Literature & art	51.00%		Investment
(Beijing) Co., Ltd.			exchange,
			advertising
LeTV New Media Culture	Tianjin	Tianjin	IT	100.00%		Procurement
(Tianjin) Co., Ltd.						of assets
						through share
						issue
Dongyang LeTV Flower Film	Dongyang	Dongyang	Film & TV culture	100.00%		Procurement
& TV Co., Ltd.						of assets
						through share
						issue
LeCloud Computing Co., Ltd.	Beijing	Beijing	Data processing	60.00%		Investment
			and technical
			services
Khorgos Lehai Culture Media	Xinjiang	Xinjiang	Membership	100.00%		Investment
Co., Ltd.			business
LeTV E-commerce (Beijing)	Beijing	Beijing	E-commerce	30.00%		Investment
Co., Ltd.
LeTV Fortune (Beijing)	Beijing	Beijing	Internet finance	100.00%		Investment
Information Technology
Co., Ltd.
Lexiang Holdings Co., Ltd.	Hong Kong	Hong Kong	—	100.00%		Investment

The Group held 30.00% shares of LeTV E-commerce (Beijing) Co., Ltd.; since LeTV Holdings (Beijing) Co., Ltd. handed over its voting rights representing 40.00% of shares to the Group, it was included in the consolidation scope.

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APPENDIX II

• (2) Important non-wholly-owned subsidiaries

Unit: RMB

			Dividends
		Gains/losses	announced to
		attributable to	be assigned to
	Shareholding	minority	minority	Ending
	ratio of	shareholders	shareholders	balance of
	minority	in the current	in the current	minority
Name of subsidiary	shareholders	period	period	interests
Leshi Zhixin Electronic
Technology (Tianjin) Limited	41.45%	-302,800,030.74	0.00	-83,922,391.33
LeTV Cultural Development
(Beijing) Co., Ltd.	49.00%	-505,024.31	0.00	1,749,690.82
LeCloud Computing Co., Ltd.	40.00%	-40,112,964.05	0.00	-30,702,729.84
LeTV E-commerce (Beijing)
Co., Ltd.	70.00%	-1,649,721.93	0.00	350,278.07
LeTV Sports Culture
Development (Beijing) Co.,
Ltd.	40.00%	-10,842,606.74	0.00	0.00
Total		-355,910,347.77		-112,525,152.28

— 264 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

(3) Main financial information of important non-wholly-owned subsidiaries	Unit: RMB	Ending balance Opening balance	Name of Non-current Current Non-current Non-current Current Non-current	subsidiary Current assets assets Total Assets liabilities liabilities Total liabilities Current assets assets Total Assets liabilities liabilities Total liabilities	Leshi Zhixin	Electronic	Technology	(Tianjin)	Limited 3,600,372,604.10 1,217,613,893.81 4,817,986,497.91 5,020,453,063.23 5,020,453,063.23 1,092,429,802.43 538,986,459.88 1,631,416,262.31 1,118,287,723.78 1,118,287,723.78	LeTV Cultural	Development	(Beijing) Co.,	Ltd. 3,512,238.77 58,558.82 3,570,797.59 0.00 0.00 4,504,247.73 97,211.72 4,601,459.45 0.00 0.00	LeCloud	Computing Co.,	Ltd. 144,008,903.43 771,204,370.19 915,213,273.62 624,398,119.55 624,398,119.55 154,974,785.71 36,232,509.81 191,207,295.52 211,763,522.44 211,763,522.44	LeTV	E-commerce	(Beijing) Co.,	Ltd. 393,630,078.86 1,643,740.30 395,273,819.16 395,630,564.78 395,630,564.78 0.00 0.00 0.00 0.00 0.00	Unit: RMB	Amount incurred in the current period Amount incurred in the previous period	Total Cash flow Total Cash flow	Operating consolidated from operating Operating consolidated from operating	Name of subsidiary revenue Net profit revenue activities revenue Net profit revenue activities	Leshi Zhixin Electronic Technology	(Tianjin) Limited 8,692,826,932.77 -730,518,771.38 -730,518,771.38 1,159,631,511.06 4,107,196,586.15 -386,338,211.59 -386,338,211.59 -437,884,480.53	LeTV Cultural Development (Beijing)	Co., Ltd. 0.00 -1,030,661.86 -1,030,661.86 121,643.98 0.00 -3,865,522.53 -3,865,522.53 -285,338.78	LeCloud Computing Co., Ltd. 562,394,995.64 -100,282,410.13 -100,282,410.13 -14,577,263.48 130,722,973.32 -32,633,040.92 -32,633,040.92 -3,821,190.88	LeTV E-commerce (Beijing) Co., Ltd. 30,303,054.74 -2,356,745.62 -2,356,745.62 63,817,836.43 0.00 0.00 0.00 0.00

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (4) Important limitations on using the assets of and paying off the liabilities of the enterprise group

None.

• (5) Financial support or other support for structured bodies included in the scope of consolidated financial statements

None.

1. Equity in joint ventures or associated enterprises

2. (1) Important joint ventures or associated enterprises

						Accounting for
						investments in
						joint ventures
Name of joint ventures or	Main business		Business	Shareholding ratio		or associated
associated enterprises	place	Registered in	nature	Direct	Indirect	enterprises
Beijing Zhiyi Information	Beijing	Beijing	Technological	20.00%		Equity method
Technology Co., Ltd.			development

• (2) Main financial information about important associated enterprises

		Unit: RMB
		Opening
	Ending balance/amount	balance/amount
	incurred in the current	incurred in the
	period	previous period
Current assets	420,492,772.07	10,324,901.89
Non-current assets	19,861,126.54	0.00
Total assets	440,353,898.61	10,324,901.89
Current liabilities	389,054,864.50	325,147.00
Non-current liabilities	1,073,009.00	0.00
Total liabilities	390,127,873.50	325,147.00
Minority interests	0.00	0.00
Equity attributable to shareholders of the parent
company	50,226,025.11	0.00
Net assets share calculated as per shareholding
ratio	10,045,254.04	0.00
Adjustments	0.00	0.00
-Goodwill	0.00	0.00

— 266 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		Opening
	Ending balance/amount	balance/amount
	incurred in the current	incurred in the
	period	previous period
-Unrealized profits of internal transactions	0.00	0.00
-Others	0.00	0.00
Book value of equity investment in associated
enterprises	10,045,254.04	0.00
Fair value of equity investment in associated
enterprises through public offer	0.00	0.00
Operating revenue	31,788,074.73	0.00
Net profit	226,270.22	0.00
Net profit of discontinued operations	0.00	0.00
Other consolidated revenue	0.00	0.00
Total consolidated revenue	0.00	0.00
Dividends from associated enterprises this year	0.00	0.00

X. Risks relevant to financial instruments

Major financial instruments of the Company include loans, receivables, payables, etc. See Note VI for details about the financial instruments. The following are risks relevant to these financial instruments and the risk management measures taken by the Group for reducing these risks: The management of the Group managed and supervised these risk exposures to keep the said risks under control.

Various risk management goals and policies

The Group’s risk management goal is to achieve balance between risks and return, minimize the adverse effect of risks on the operating results of the Group and maximize the interests of shareholders and other equity investors. To achieve the said goal, the Group formulated a basic strategy of defining and analyzing various risks faced by the Group, setting a bottom line of risk tolerance and conducting timely and reliable supervision on the risks to keep them under control.

(1) Foreign exchange risk

Foreign exchange risk refers to the risk brought by foreign exchange rate fluctuations which may affect the Company’s financial results and cash flow. Foreign exchange risk borne by the Company is mainly related to monetary capital held and purchase & sale business settled in USD. The Company faces the risk of a fluctuating exchange rate between USD and the Company’s functional currency. See Note VII. 51 for the balance of foreign currency assets and liabilities on the balance sheet date.

The Group paid close attention to the influence of exchange rate fluctuations on the Group.

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APPENDIX II

(2) Credit risk

As at December 31st, 2015, the largest credit risk exposure that may incur financial loss to the Company came from the other party’s failure to perform its obligations under the contract (leading to a loss of financial assets of the Group) and the financial guarantee provided by the Group, including:

Book value of financial assets recognized in the consolidated balance sheet; for financial instruments measured at fair value, their book value reflects their risk exposure, but not their largest risk exposure, which will change with their future fair value.

To reduce credit risk, the Group established an ad hoc department for credit line determination and credit approval and carried out other monitoring procedures to make sure necessary measures are taken to recover overdue debts. Besides, the Group checked recovery of every single receivable on each balance sheet date to make sure abundant provision had been withdrawn for irrecoverable items. Therefore, the management of the Group held that the credit risk of the Group had been reduced considerably.

The Group’s credit risk related to working capital was relatively low as its working capital was deposited in banks of high credit rating.

The Group had taken necessary measures to make sure all customers have a good credit record. Except the top five accounts receivable, the Group had no other credit concentration risk.

(3) Liquidity risk

Liquidity risk is the risk that the Group cannot perform its financial obligations on the maturity date. To keep such risk under control, the Group made sure there was enough working capital to repay mature debts so as to avoid unacceptable losses or reputation damage. The Group analyzed liability structure and maturity on a regular basis to ensure capital adequacy. The management of the Group monitored use of bank loans and ensured strict compliance with the loan agreements. Meanwhile, the Group negotiated with financial institutions to ensure enough credit line was extended as a way to reduce liquidity risk.

The Group’s funds raised were mainly from bond issuance, long-term loans and volunteer loans from Jia Yueting and Jia Yuefang. As at December 31st, 2015, the Group’s bonds issued logged RMB1,930,000,000.00, long-term loans logged RMB300,000,000.00 and voluntary loans from Jia Yueting and Jia Yuefang logged RMB3,472,336,372.62; loans from connected parties could be used gratuitously for long term and were less risky.

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APPENDIX II

XI. Disclosure of fair value

1. Ending fair value of assets and liabilities measured at fair value

Unit: RMB

		**Ending **	fair value
	Level 1 fair	Level 2 fair	**Level 3 **	fair
	value	value	value
Items	measurement	measurement	measurement		Total
I. Recurring fair value
measurement	—	—		—	—
(II) Available-for-sale financial
assets	85,748,670.26	0.00		0.00	85,748,670.26
Total amount of assets through
recurring fair value
measurement	85,748,670.26	0.00		0.00	85,748,670.26
II. Non-recurring fair value
measurement	—	—		—	—

XII. Connected parties and connected transactions

1. The Company’s parent company

The ultimate controller of the Company is Jia Yueting.

2. The Company’s subsidiaries

See Note “IX. 1. (1) Constitution of the Enterprise Group” for details about the Company’s subsidiaries.

1. The Company’s joint ventures and associated enterprises

See Note “IX. 3. (1) Important Associated Enterprises” for details about important joint ventures or associated enterprises of the Company.

Information on other joint ventures or associated enterprises with balance formed through its connected transactions with the Company in the current and previous periods is as follows:

Name of joint venture or associated Relationship with the Company

enterprise

Beijing Zhiyi Information Technology Co., Under the control of the same controller Ltd.

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APPENDIX II

1. Information about other connected parties

Name of other connected party

Relation between other connected party and the Company

LeTV Mobile E-commerce (Beijing) Co., Ltd. LeTV Sports Culture Development (Beijing) Co., Ltd. LeTV Mobile Intelligent Information Technology (Beijing) Co., Ltd. Le Vision Pictures (Beijing) Co., Ltd. Le Vision Pictures (Tianjin) Co., Ltd. Leyi Interconnection Intelligent Technology (Beijing) Co., Ltd. Shanxi Xibeier Communication Technology Co., Ltd. Le Wish Ltd LE CORPORATION LIMITED Leka Automobile Intelligent Technology (Beijing) Co., Ltd. LeTV Holdings (Beijing) Co., Ltd. Lepa Marketing Services (Beijing) Co., Ltd. Leguo Culture Media (Beijing) Co., Ltd. Leying Network Information (Tianjin) Co., Ltd. Beijing Hongcheng Xintai Real Estate Co., Ltd. LeTV Virtual Reality Technology (Beijing) Co., Ltd. LeTV Feige Technology (Tianjin) Co., Ltd. Beijing Wangjiu Electronic Commerce Co., Ltd. Cymbidium Yushu (Beijing) Technology Co., Ltd. Xbell Union Communication Technology (Beijing) Co., Ltd.

Under the control of the same controller Under the control of the same controller Under the control of the same controller

Under the control of the same controller Under the control of the same controller Under the control of the same controller

Under the control of the same controller

Under the control of the same controller Under the control of the same controller Under the control of the same controller

Under the control of the same controller Under the control of the same controller Under the control of the same controller Under the control of the same controller

Under the control of the same controller

Under the control of the same controller

Under the control of the same controller Under the control of the same controller

Under the control of the same controller

Under the control of the same controller

— 270 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Connected transactions

2. (1) Purchase and sale of commodities, and provision and acceptance of labor service

Commodities purchased/labor services accepted

Unit: RMB

		Amount		Whether the	Amount
	Content of	incurred in	Approved	transaction	incurred in
	connected	the current	transaction	limit is	the previous
Connected party	transaction	period	limit	exceeded	period
Beijing Wangjiu Electronic	Goods purchase	13,261,938.80		No	2,412,260.00
Commerce Co., Ltd.
Cymbidium Yushu (Beijing)	Copyright	134,111.40		No	0.00
Technology Co., Ltd.	purchase
Leguo Culture Media	Copyright	44,080.00		No	2,400,000.00
(Beijing) Co., Ltd.	purchase
LeTV Feige Technology	Goods purchase	2,724,677.08		No	0.00
(Tianjin) Co., Ltd.
LeTV Mobile E-commerce	Goods purchase	1,772,359,969.10		No	0.00
(Beijing) Co., Ltd.
LeTV Sports Culture	Advertising	289,871,844.62		No	0.00
Development (Beijing) Co.,	profit-sharing
Ltd.
LeTV Mobile Intelligent	Profit-sharing	346,173,254.00		No	0.00
Information Technology	among members
(Beijing) Co., Ltd.	and payment for
	goods
Le Vision Pictures (Beijing)	Copyright	257,999,455.98		No	43,471,337.50
Co., Ltd.	purchase and
	advertising
Le Vision Pictures (Tianjin)	Copyright	500,000.00		No	38,689,625.00
Co., Ltd.	purchase and
	advertising
Leyi Interconnection	Goods purchase	27,171,442.40		No	0.00
Intelligent Technology
(Beijing) Co., Ltd.
LeTV Entertainment	Advertising	0.00		No	455,144.40
Investment (Beijing) Co.,
Ltd.
Total		2,710,240,773.38		No	87,428,366.90

— 271 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Commodities sold/labor services provided

Unit: RMB

	Content of	Amount incurred	Amount incurred
	connected	in the current	in the previous
Connected party	transaction	period	period
LeTV Mobile Intelligent Information	Revenue from	971,027,691.44	58,300,000.00
Technology (Beijing) Co., Ltd.	membership fees,
	advertising fees
	and royalties
LeTV Sports Culture Development	Revenue from	278,776,781.53	0.00
(Beijing) Co., Ltd.	advertising and
	technical services
Beijing Zhiyi Information Technology	Sale of goods	159,739,233.76	0.00
Co., Ltd.
Le Wish Ltd	Sale of copyright	80,228,428.00	0.00
LE CORPORATION LIMITED	Sale of goods	74,805,945.00	0.00
Leka Automobile Intelligent	Technical services	21,875,586.65	0.00
Technology (Beijing) Co., Ltd.
Beijing Wangjiu Electronic Commerce	Advertising	17,101,166.93	190,934.00
Co., Ltd.	revenue and
	payment for goods
Le Vision Pictures (Beijing) Co., Ltd.	Revenue from sale	15,898,700.00	0.00
	of copyright and
	advertising
LeTV Mobile E-commerce (Beijing)	Revenue from	15,437,914.62	0.00
Co., Ltd.	royalties
LeTV Holdings (Beijing) Co., Ltd.	Sale of goods	3,513,959.16	14,700.00
Leyi Interconnection Intelligent	Sale of goods	20,353.00	0.00
Technology (Beijing) Co., Ltd.
Leying Network Information (Tianjin)	Technical service	54,984.64	0.00
Co., Ltd.	charges
Total		1,638,480,744.73	58,505,634.00

— 272 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

(2) Rental with connected parties

The Company as the lessor:

Unit: RMB

		Rental income	Rental income
	Type of leasing	recognized in the	recognized in the
Name of Lessee	assets	current period	previous period
LeTV Sports Culture Development	Equipment leasing	1,511,972.54	0.00
(Beijing) Co., Ltd.
LeTV Holdings (Beijing) Co., Ltd.	House leasing	0.00	614,821.00
Total		1,511,972.54	614,821.00

The Company as the lessee:

			Unit: RMB
		Rental fee	Rental fee
	Type of leasing	recognized in the	recognized in the
Name of Lessor	assets	current period	previous period
Beijing Hongcheng Xintai Real Estate	House leasing	12,930,073.50	7,734,818.90
Co., Ltd.
Shanxi Xibeier Communication	House leasing	8,303.76	58,126.24
Technology Co., Ltd.
Total		12,938,377.26	7,792,945.14
(3) Guarantee with connected parties
The Company as the guaranteed party
			Unit: RMB

				Whether the
	Guaranteed	Starting date of	Expiring date	guarantee has
Guarantor	amount	guarantee	of guarantee	been fulfilled
Jia Yueting, LeTV Information	50,000,000.00	February 16th, 2015	February 15th, 2016	No
Technology (Tianjin) Co.,
Ltd.
Jia Yueting, LeTV Information	50,000,000.00	May 14th, 2015	May 14th, 2016	No
Technology (Tianjin) Co.,
Ltd.

— 273 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

				Whether the
	Guaranteed	Starting date of	Expiring date	guarantee has
Guarantor	amount	guarantee	of guarantee	been fulfilled
Jia Yueting, LeTV Information	50,000,000.00	May 14th, 2015	May 14th, 2016	No
Technology (Tianjin) Co.,
Ltd.
LeTV Information Technology	150,000,000.00	June 5th, 2015	June 5th, 2016	No
(Tianjin) Co., Ltd., Beijing
Xbell Communication
Technology Co., Ltd.
Jia Yueting, LeTV Information	40,000,000.00	June 9th, 2015	June 9th, 2016	No
Technology (Tianjin) Co.,
Ltd.
Jia Yueting	49,000,000.00	June 17th, 2015	June 17th, 2016	No
Jia Yueting	51,000,000.00	June 25th, 2015	June 25th, 2016	No
Jia Yueting, Jia Yuemin, Le	50,000,000.00	June 25th, 2015	June 24th, 2016	No
Vision Pictures (Beijing) Co.,
Ltd.
Jia Yueting	200,000,000.00	August 13th, 2015	August 13th, 2016	No
Jia Yueting	90,000,000.00	August 14th, 2015	August 13th, 2016	No
Jia Yueting, LeTV Information	75,000,000.00	August 26th, 2015	August 26th, 2016	No
Technology (Tianjin) Co.,
Ltd.
Jia Yueting	200,000,000.00	September 25th, 2015	September 23rd, 2016	No
Jia Yueting, LeTV Information	30,000,000.00	September 30th, 2015	August 10th, 2016	No
Technology (Tianjin) Co.,
Ltd.
Jia Yueting, LeTV Information	6,809,413.00	September 30th, 2015	August 30th, 2016	No
Technology (Tianjin) Co.,
Ltd.
Jia Yueting, LeTV Information	43,190,587.00	October 30th, 2015	September 30th, 2016	No
Technology (Tianjin) Co.,
Ltd.
Jia Yueting, LeTV Holdings	100,000,000.00	December 7th, 2015	December 7th, 2016	No
(Beijing) Co., Ltd.
Jia Yueting, LeTV Holdings	50,000,000.00	December 7th, 2015	December 7th, 2016	No
(Beijing) Co., Ltd.
Jia Yueting, Beijing Hongcheng	100,000,000.00	August 26th, 2015	June 25th, 2016	No
Xintai Real Estate Co., Ltd.
LeTV Information Technology	300,000,000.00	December 28th, 2015	December 28th, 2017	No
(Tianjin) Co., Ltd.
Jia Yueting, LeTV Information	200,000,000.00	December 17th, 2015	June 14th, 2016	No
Technology (Tianjin) Co.,
Ltd.
Jia Yueting, LeTV Holdings	50,000,000.00	December 28th, 2015	June 28th, 2016	No
(Beijing) Co., Ltd.
1,935,000,000.00

— 274 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

• (4) Call loans with connected parties

Unit: RMB

Connected party Amount Starting date Expiring date Description Borrowing Jia Yueting 2,070,600,718.00 — — See Announcement 2015-063 for details Jia Yuefang 1,401,735,654.62 — — See Announcement 2014-116 for details Lending

• (5) Remuneration of key executives

Unit: RMB’0,000

	Amount	Amount
	incurred in	incurred in
	the current	the previous
Items	period	period
Jia Yueting	60.00	60.00
Han Fangming	32.00	60.00
Liu Hong	60.00	60.00
Deng Wei	50.00	0.00
Zhang Changsheng	11.00	0.00
Shen Yanfang	11.00	0.00
Cao Bin	3.00	0.00
Zhu Ning	3.00	0.00
Wu Meng	26.00	0.00
Ji Xiaoqing	0.00	0.00
Tian Bingxin	0.00	0.00
Yuan Bin	24.00	0.00
Zhang Minhui	18.00	0.00
Wu Yazhou	79.00	72.00
Liang Jun	169.00	116.40
Jin Jie	58.00	51.00
Gao Fei	77.00	73.50
Yang Yongqiang	48.00	48.00
Tan Shu	71.00	66.00
Yang Lijie	54.00	54.00
Zhang Te	37.00	44.40
Zhao Kai	6.00	0.00
Lei Zhenjian	66.00	67.50
Jia Yuemi	48.00	56.00
Liu Gang	6.00	48.00
Jiang Xiaolin	15.00	0.00
Total	1,032.00	876.80

— 275 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Receivables and payables of connected party

2. (1) Receivables

Unit: RMB

		**Ending **	balance		**Opening **	balance
		Book balance	Provision for		Book balance	Provision for
Item name	Connected party		bad debts			**bad **	debts
Accounts	LE CORPORATION	66,271,745.00	1,988,152.35		0.00		0.00
receivable	LIMITED
Accounts	Le Wish Ltd	80,228,428.00	2,406,852.84		0.00		0.00
receivable
Accounts	Beijing Wangjiu	13,388,157.93	401,644.74		50,852.00	1,525.56
receivable	Electronic
	Commerce Co., Ltd.
Accounts	Leka Automobile	21,823,172.18	654,695.17		0.00		0.00
receivable	Intelligent
	Technology
	(Beijing) Co., Ltd.
Accounts	LeTV Holdings	16,929.16		507.87	0.00		0.00
receivable	(Beijing) Co., Ltd.
Accounts	LeTV Sports Culture	40,556,400.84	1,216,692.02		0.00		0.00
receivable	Development
	(Beijing) Co., Ltd.
Accounts	LeTV Mobile	241,213,868.73	7,236,416.06		58,300,000.00	1,749,000.00
receivable	Intelligent
	Information
	Technology
	(Beijing) Co., Ltd.
Accounts	Leying Network	54,984.64	1,649.54		0.00		0.00
receivable	Information
	(Tianjin) Co., Ltd.
Accounts	LeTV Mobile	22,000.00		0.00	0.00		0.00
prepaid	Intelligent
	Information
	Technology
	(Beijing) Co., Ltd.
Accounts	LeTV Mobile	82,540,876.78		0.00	0.00		0.00
prepaid	E-commerce
	(Beijing) Co., Ltd.
Accounts	Leguo Culture	0.00		0.00	760,000.00		0.00
prepaid	Media (Beijing) Co.,
	Ltd.

— 276 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

				**Ending **	balance		**Opening **	balance
		Book balance			Provision for		Book balance	Provision for
Item name	Connected party				**bad **	debts		bad debts
Accounts	Shanxi Xibeier			0.00		0.00	8,303.76	0.00
prepaid	Communication
	Technology Co.,
	Ltd.
Other	LeTV Sports Culture		801,512.61		24,045.38		182,898,799.13	5,486,963.97
receivables	Development
	(Beijing) Co., Ltd.
Other	LeTV Holdings	10,841,367.97			325,241.04		0.00	0.00
receivables	(Beijing) Co., Ltd.
Other	LeTV Mobile	6,325,530.74			189,765.92		32,304.80	969.14
receivables	Intelligent
	Information
	Technology
	(Beijing) Co., Ltd.
Other	Lepa Marketing	16,767,553.14			503,026.59		0.00	0.00
receivables	Services (Beijing)
	Co., Ltd.
Other	Xbell Union			0.00		0.00	50,000.00	150.00
receivables	Communication
	Technology
	(Beijing) Co., Ltd.
(2) Payables
								Unit: RMB
						Ending book		Opening book
Item name	Connected party						balance	balance
Accounts payable Le Vision Pictures (Beijing)					Co., Ltd.	306,720,776.22		47,200,000.00
Accounts payable Le Vision Pictures (Tianjin) Co., Ltd.						36,000,000.00		46,500,000.00
Accounts payable Beijing Hongcheng				Xintai Real Estate			3,232,376.40	7,734,818.90
	Co., Ltd.
Accounts payable Beijing Wangjiu Electronic Commerce							20,757.00	0.00
	Co., Ltd.
Accounts payable LeTV Feige Technology (Tianjin) Co.,							2,328,783.83	0.00
	Ltd.
Accounts payable LeTV Mobile		E-commerce (Beijing)				30,049,238.73		0.00
	Co., Ltd.
Accounts payable LeTV Sports Culture Development							1,319,470.64	0.00
	(Beijing) Co.,	Ltd.

— 277 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

		Ending book	Opening book
Item name	Connected party	balance	balance
Accounts payable	LeTV Mobile Intelligent Information	73,536.00	0.00
	Technology (Beijing) Co., Ltd.
Accounts payable	Leyi Interconnection Intelligent	12,227,679.30	0.00
	Technology (Beijing) Co., Ltd.
Advances received	Beijing Zhiyi Information Technology	478,309,755.24	0.00
	Co., Ltd.
Advances received	LeTV Sports Culture Development	223,667.90	0.00
	(Beijing) Co., Ltd.
Other payables	LeTV Virtual Reality Technology	179,458.00	0.00
	(Beijing) Co., Ltd.
Other payables	LeTV Mobile E-commerce (Beijing)	6,578.00	0.00
	Co., Ltd.
Other payables	Le Vision Pictures (Beijing) Co., Ltd.	2,400.00	1,000.00
Other payables	LeTV Holdings (Beijing) Co., Ltd.	0.00	614,821.00

XIII. Share-based payment

1. Overall information of share-based payment

2. Applicable □ Not Applicable

Unit: RMB

Total amount of the Company’s equity instruments granted in the current period 312,160,600.00 Total amount of the Company’s equity instruments exercised in 43,519,606.73 the current period Total amount of the Company’s equity instruments invalidated in 36,355,723.42 the current period Scope of exercise price of the Company’s stock options Exercise price of the Company’s outstanding at the end of the period and remaining contract stock options outstanding at the period end of the period was RMB3.615, RMB5.542, RMB19.188 and RMB38.84; the options were last exercised on October 12th, 2020 of exercise of the other None

• Scope of exercise price of the Company’s other equity instruments outstanding at the end of the period and remaining contract period

— 278 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

2. Equity-settled share-based payment

• Applicable □ Not Applicable

Unit: RMB

The method of determining the fair value of equity instrument on the grant date Basis for determining the quantity of exercisable equity instruments

Reasons for significant difference between the current estimate and previous estimate Accumulated amount of equity-settled share-based payment included in the capital reserve

Total recognized amount of equity-settled share-based payment in the current period

Black-Scholes model

The quantity of exercisable equity instruments was estimated based on the latest change in the number of persons who can exercise options and accomplishment of business goals and other follow-up information updated

None

216,529,943.08

56,435,477.96

1. Cash-settled share-based payment □ Applicable � Not Applicable

4. Amendment and termination of share-based payment

None

— 279 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

XIV. Commitments and contingencies

1. Important commitments

Important commitments on the balance sheet date

As at December 31st, 2015, the Company had signed the following irrevocable lease contracts:

1. Operating lease

Minimum rental payment of irrevocable operating lease	Amount
	(RMB’0,000)
The first year after balance sheet date	4,125.21
The second year after balance sheet date	3,835.11
Total	7,960.32

1. Finance lease

• 1) The Group signed a master lease agreement with HP Leasing Co., Ltd., involving a total rental amount of RMB18,483,760.00. The rental was paid by season (postpaid) in 12 installments, namely, RMB1,540,305.00 for each installment.

Lease period	Amount
	(RMB)
The first year after balance sheet date	4,621,015.00
The second year after balance sheet date	0.00
Total	4,621,015.00

• 2) The Group signed a master lease agreement with HP Leasing Co., Ltd., involving a total rental amount of RMB3,617,734.48. The rental was paid by season (postpaid) in 12 installments, namely, RMB301,469.54 for each installment.

Lease period	Amount
	(RMB)
The first year after balance sheet date	1,205,978.16
The second year after balance sheet date	0.00
Total	1,205,978.16

— 280 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• 3) The Group signed a master lease agreement with HP Leasing Co., Ltd., involving a total rental amount of RMB16,543,905.52. The rental was paid by season (postpaid) in 12 installments, namely, RMB1,378,650.46 for each installment.

Lease period

Lease period	Amount
	(RMB)
The first year after balance sheet date	5,514,601.84
The second year after balance sheet date	1,378,750.46
Total	6,893,352.30

• 4) The Group signed a fixed asset finance lease agreement with Beijing Branch of China Telecom Corporation Limited, involving a total rental amount of RMB7,411,950.36. The rental was paid by season (postpaid) in 12 installments, namely, RMB617,662.53 for each installment.

Lease period	Amount
	(RMB)
The first year after balance sheet date	2,470,650.12
The second year after balance sheet date	411,775.02
Total	2,882,425.14

• 5) The Group signed a master lease agreement with HP Leasing Co., Ltd., involving a total rental amount of RMB4,306,060.00. The rental was paid by season (postpaid) in 12 installments, namely, RMB358,830.00 for each installment.

Lease period	Amount
	(RMB)
The first year after balance sheet date	1,435,320.00
The second year after balance sheet date	717,760.00
Total	2,153,080.00

• 6) The Group signed a master lease agreement with HP Leasing Co., Ltd., involving a total rental amount of RMB25,884,610.00. The rental was paid by season (postpaid) in 12 installments, namely, RMB2,157,142.50 for each installment.

Lease period	Amount
	(RMB)
The first year after balance sheet date	8,628,170.00
The second year after balance sheet date	4,314,185.00
Total	12,942,355.00

— 281 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• 7) The Group signed a fixed asset finance lease agreement with Minsheng Financial Leasing Co., Ltd., involving a total rental amount of RMB161,100,574.40. The rental was paid by season (postpaid) in 8 installments, namely, RMB20,137,571.80 for each installment.

Lease period	Amount
	(RMB)
The first year after balance sheet date	60,596,527.47
The second year after balance sheet date	0.00
Total	60,596,527.47

• 8) The Group signed a master lease agreement with HP Leasing Co., Ltd., involving a total rental amount of RMB4,633,188.28. The rental was paid by season (postpaid) in 12 installments, namely, RMB386,090.69 for each installment.

Lease period	Amount
	(RMB)
The first year after balance sheet date	1,544,362.76
The second year after balance sheet date	1,544,362.76
Total	3,088,725.52

• 9) The Group signed a master lease agreement with HP Leasing Co., Ltd., involving a total rental amount of RMB8,732,944.48. The rental was paid by season (postpaid) in 12 installments, namely, RMB727,737.04 for each installment.

Lease period	Amount
	(RMB)
The first year after balance sheet date	2,910,948.16
The second year after balance sheet date	2,910,948.16
Total	5,821,896.32

• 10) The Group signed a master lease agreement with HP Leasing Co., Ltd., involving a total rental amount of RMB10,124,752.00. The rental was paid by season (postpaid) in 12 installments, namely, RMB843,721.00 for each installment.

Lease period	Amount
	(RMB)
The first year after balance sheet date	3,374,884.00
The second year after balance sheet date	3,374,884.00
Total	6,749,768.00

— 282 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• 11) The Group signed a master lease agreement with HP Leasing Co., Ltd., involving a total rental amount of RMB33,263,880.16. The rental was paid by season (postpaid) in 12 installments, namely, RMB2,771,981.68 for each installment.

Lease period

Amount (RMB)

The first year after balance sheet date 11,087,926.72 The second year after balance sheet date 11,087,926.72 Total 22,175,853.44

XV. Events subsequent to balance sheet date

1. Profit sharing

According to the resolution of the Board of Directors, the preliminary profit sharing plan for the year was to distribute RMB0.31 (tax inclusive) of cash dividends for each 10 shares based on a total equity of 1,856,015,158 shares by the end of 2015, totaling RMB57,536,469.90; after implementation of the said plan, the remaining RMB1,257,956,302.38 undistributed profit of the Company would be carried forward to subsequent years for profit sharing.

This preliminary profit sharing plan shall not be implemented until approved at the 2015 General Meeting.

1. Sales return

None

3. Other events after balance sheet date

(1) Investing in setting up a property insurance company

According to Announcement No. 2016-005 about investment in setting up a property insurance company, to increase its comprehensive competitiveness and realize its strategic layout in the financial field, on January 19th, 2016 the Company planned to set up Xinwo Property Insurance Co., Ltd. (tentative name, subject to approval by the registration authority) together with Sinvo Capital Holdings Co., Ltd., Shenzhen O-Film Tech. Co., Ltd., Shenzhen Clou Electronics Co., Ltd., Shanghai Shimao Co., Ltd., Beijing Kadapu Investment Co., Ltd., Bainian Kangcheng Health Management Group Co., Ltd. and Jiangxi Jimin Kexin Group Co., Ltd. The registered capital of Xinwo Property Insurance was planned to be RMB1 billion, with RMB170 million to be contributed by the Company in currency, accounting for 17% of Xinwo Property Insurance’s total registered capital. As at March 17th, 2016, the Company did not make any contribution.

— 283 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (2) Staged financing by holding subsidiary LeCloud Computing Co., Ltd.

According to Announcement 2016-021 about staged financing by the Company’s holding subsidiary, on March 3rd, 2016 the Company’s holding subsidiary LeCloud Computing Co., Ltd. completed staged financing; Chongqing Strategic Emerging Industry LeCloud Special Equity Investment Fund Joint Venture (limited partnership) invested RMB1 billion and provided relevant industry resources. After this capital increase, the registered capital of LeCloud Computing Co., Ltd. increased by RMB132,523,993 from RMB662,619,965 to RMB795,143,958, and the shareholding percentage of the Company changed to 50.00%.

XVI. Other important issues

1. Information about segments

• (1) Determination basis and accounting policies of reporting segment

The Group determines business segments based on the internal organizational structure, management requirements and internal reporting system and determines reporting segments based on business segments.

A business segment refers to a constituent part simultaneously meeting the following conditions: (1) it can generate revenues and incur expenses in daily activities; (2) the management can regularly evaluate its operating results to determine the resources to be allocated to it and assess its performance; (3) the Group can obtain the financial position, operating results, cash flow and other accounting information of the constituent part.

Reporting segments of the Company include:

• ① The businesses of Dongyang LeTV Flower Film & TV Co., Ltd. shall be the reporting segment for distribution of films & TV plays;

• ② The businesses of Leshi Zhixin Electronic Technology (Tianjin) Limited and LeTV E-commerce (Beijing) Co., Ltd. shall be the reporting segment for terminal business;

• ③ Businesses other than distribution of films & TV plays and terminal business shall be the reporting segment for Internet service;

Accounting policies for business segments of the Group are the same as the Group’s major accounting policies.

— 284 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (2) Financial information about reporting segments

Unit: RMB

Distribution of Eliminations Items films & TV plays Terminal business Internet service among segments Total Operating revenue 511,792,790.26 8,723,129,987.51 5,727,696,768.94 1,945,894,422.59 13,016,725,124.12 Operating costs 150,536,999.39 8,385,952,831.46 3,739,498,898.85 1,163,979,605.86 11,112,009,123.84 Total assets 728,712,488.20 5,213,260,317.07 18,902,091,943.79 7,861,910,190.15 16,982,154,558.91 Total liabilities 234,198,207.97 5,416,083,628.01 12,812,247,439.08 5,295,508,995.84 13,167,020,279.22

• (3) If the Company has no reporting segment or the total assets and total liabilities of the reporting segments cannot be disclosed, please explain the reason

• Other important transactions and events affecting investors’ decision-making

1. Non-public offering

On September 23rd, 2015, the non-public offering plan was unconditionally approved by the Issuance Examination Committee of CSRC; later the Company experienced stock trade suspension due to major asset restructuring, purchase of major assets (subscribing the new shares of TCL Multimedia through the wholly-owned subsidiary set up in Hong Kong by the holding subsidiary) and other events, during which post-meeting feedbacks were also submitted; the Company learnt from the regulatory authority that the approval document was being issued.

2. Major asset restructuring (injection of Le Vision Pictures)

On December 5th, 2015 the Company applied for suspending stock trading and initiated injection of Le Vision Pictures. Since this injection involves a large asset size, multiple transaction parties, massive audit and evaluation work and substantial coordination and communication, the restructuring plan remains to be discussed and improved. Relevant work is proceeding smoothly. The Company planned to disclose the preliminary plan or report of this major asset restructuring before May the 7[th] and resume stock trading after obtaining the approval from Shenzhen Stock Exchange following the procedure of major asset restructuring.

3. Subscription of new shares of TCL Multimedia

On December 11th, 2015, the Company’s holding subsidiary Leshi Zhixin signed a Share Subscription Agreement with TCL Multimedia, according to which the Company subscribed 348,850,000 new shares of TCL Multimedia at a price of HK$6.5/per share (totalling HK$2,267,525,000, approximately RMB1.875 billion) through the wholly-owned subsidiary LeTV Zhixin Investment (Hong Kong) Co., Ltd. set up in Hong Kong by Leshi Zhixin Electronic Technology (Tianjin) Limited.

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FINANCIAL INFORMATION OF LESHI INTERNET

1. Investing in Beijing Edooon Sport Network Technology Co., Ltd.

On July 8th, 2015, the Company and LeTV Sports Culture Development (Beijing) Co., Ltd. signed an investment agreement to jointly invest in Beijing Edooon Sport Network Technology Co., Ltd., with the Company contributing RMB10 million with self-owned funds and LeTV Sports contributing RMB5 million. Beijing Edooon Sport Network Technology Co., Ltd. registered relevant changes with the industry and commerce authority on January 8th, 2016.

XVII. Notes to major items in the financial statements of the parent company

1. Accounts receivable

2. (1) Disclosure of accounts receivable by category

Unit: RMB

Category			Ending balance	Ending balance	Ending balance					Opening balance	Opening balance
	Book balance		**Provision for **		**bad **	debts		Book balance		**Provision for **	**bad **	debts
				Withdrawal						Withdrawal
	**Amount **	Percentage	Amount		percentage		Book value	**Amount **	Percentage	Amount	percentage		Book value
Accounts receivables for which
the provision for bad debts is
withdrawn by combination of
credit risk features	3,711,022,194.23	100.00%	169,475,404.68			4.57%	3,541,546,789.55	1,619,188,415.41	100.00%	69,713,410.01		4.31%	1,549,475,005.40
Total	3,711,022,194.23	100.00%	169,475,404.68			4.57%	3,541,546,789.55	1,619,188,415.41	100.00%	69,713,410.01		4.31%	1,549,475,005.40

Accounts receivable whose amount is significant individually and for which provision for bad debts is withdrawn individually by the end of the period:

• Applicable � Not Applicable

Accounts receivable for which provision is withdrawn for bad debts as per age analysis method in portfolio:

==> picture [179 x 10] intentionally omitted <==

Unit: RMB

Ending balance

		Ending balance
Age	Accounts receivable	Provision for bad debts	Withdrawal percentage
Within 1 year	2,122,273,592.22	63,668,207.77	3.00%
1-2 years	439,663,539.32	43,966,353.93	10.00%
2-3 years	180,261,314.63	45,065,328.66	25.00%
3-4 years	33,551,028.64	16,775,514.32	50.00%
4-5 years	0.00	0.00	50.00%
Over 5 years	0.00	0.00	100.00%
Total		2,775,749,474.81	169,475,404.68

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APPENDIX II

Accounts receivable for which provision is withdrawn for bad debts as per balance percentage method in portfolio:

• Applicable � Not Applicable

(2) Provision for bad debts withdrawn, recovered or reversed in the current period

In the current period, the provision for bad debts withdrawn amounted to RMB99,761,994.67, and the provision for bad debts recovered or reversed was RMB0.00.

(3) Top five balances of accounts receivable by debtor at the end of the period

This year, the top five balances of accounts receivable by debtor at the end of the period totaled RMB1,385,271,727.09, accounting for 37.33% of the total balance of accounts receivable at the end of the period, and the balance of corresponding provision withdrawn for bad debts at the end of the period was RMB17,866,584.49.

2. Other receivables

• (1) Disclosure of other receivables by category

Unit: RMB

			Ending balance	Ending balance					Opening balance	Opening balance
			**Provision for **		bad				Provision for bad
Category	**Book **	balance	debts				**Book **	balance	debts
				Withdrawal						Withdrawal
	**Amount **	Percentage	Amount	percentage		Book value	**Amount **	Percentage	Amount	percentage		Book value
Other receivables for which the
provision for bad debts is
withdrawn by combination of
credit risk features	2,632,694,855.08	100.00%	1,037,009.98		0.04%	2,631,657,845.10	1,617,437,559.01	100.00%	496,749.95		0.03%	1,616,940,809.06
Total	2,632,694,855.08	100.00%	1,037,009.98		0.04%	2,631,657,845.10	1,617,437,559.01	100.00%	496,749.95		0.03%	1,616,940,809.06

Other receivable whose amount is significant individually and for which provision for bad debts is withdrawn individually by the end of the period:

• Applicable � Not Applicable

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APPENDIX II

Other receivables for which provision is withdrawn for bad debts as per age analysis method in portfolio:

� Applicable □ Not Applicable

Unit: RMB

		Ending balance
		Provision for	Withdrawal
Age	Other receivables	bad debts	percentage
Within 1 year (subitem)
Within 1 year (subtotal)	18,150,829.85	544,524.90	3.00%
1-2 years	1,917,895.80	191,789.57	10.00%
2-3 years	1,202,332.02	300,583.01	25.00%
3-4 years	225.00	112.50	50.00%
4-5 years	0.00	0.00	50.00%
Over 5 years	0.00	0.00	100.00%
Total	21,271,282.67	1,037,009.98

Basis for determining the portfolio:

Other receivables for which provision is withdrawn for bad debts as per balance percentage method in portfolio:

==> picture [175 x 11] intentionally omitted <==

Other receivables for which provision is withdrawn for bad debts as per other methods in portfolio:

==> picture [175 x 10] intentionally omitted <==

(2) Provision for bad debts withdrawn, recovered or reversed in the current period

In the current period, the provision for bad debts withdrawn amounted to RMB540,260.03, and the provision for bad debts recovered or reversed was RMB0.00.

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APPENDIX II

• (3) Other receivables classified by nature of payment

		Unit: RMB
	Ending book	Opening book
Nature of payment	balance	balance
Current account	2,607,529,034.81	1,597,718,303.65
Petty cash and deposit	25,165,820.27	19,719,255.36
Total	2,632,694,855.08	1,617,437,559.01

• (4) Top five balances of other receivables by debtor at the end of the period

					Unit: RMB
				Percentage in	Balance
				total balance of	of provision for
				other receivables	bad debts
	Nature of			at the end	at the end
Name of entity	payment	Ending balance	Age	of the period	of the period
LeTV Information
Technology (Tianjin)	Transactions with
Co., Ltd.	connected parties	1,589,829,653.42	0-2 years	60.39%	0.00
Leshi Zhixin Electronic
Technology (Tianjin)	Transactions with
Limited	connected parties	387,895,055.05	Within 1 year	14.73%	0.00
Letv Information
Technology (Tibet) Co.,	Transactions with
Ltd.	connected parties	343,790,176.00	Within 1 year	13.06%	0.00
LeCloud Computing Co.,	Transactions with
Ltd.	connected parties	274,330,035.78	Within 1 year	10.42%	0.00
LeTV Holdings (Beijing)	Transactions with
Co., Ltd.	connected parties	10,841,367.97	Within 1 year	0.41%	325,241.04
Total	—	2,606,686,288.22	—	99.01%	325,241.04

• (5) Government subsidy related receivables

						Unit: RMB
						Estimated time
			Name of project			of receiving the
			receiving			subsidies and the
			government			amount and
**Name **	**of **	entity	subsidies	Ending balance	Ending age	basis thereof

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Long-term equity investment

Unit: RMB

		Ending balance			Opening balance
		Provision for			Provision for
Items	Book balance	impairment	Book value	Book balance	impairment	Book value
Investment in
subsidiaries	3,129,314,897.13	0.00 3,129,314,897.13		2,424,070,405.43	0.00 2,424,070,405.43
Investment in
associated
enterprises
and joint
ventures	10,045,254.04	0.00	10,045,254.04
Total	3,139,360,151.17	0.00 3,139,360,151.17		2,424,070,405.43	0.00 2,424,070,405.43

(1) Investment in subsidiaries

Unit: RMB

					Provision	Balance of
					withdrawn for	provision for
					impairment in	impairment at
		Increase in the	Decrease in the		the current	the end of the
Invested entity	Opening balance	current period	**current period **	Ending balance	period	period
LeTV Information
Technology
(Shanghai) Co.,
Ltd.	500,000.00	0.00	0.00	500,000.00	0.00	0.00
LeTV Information
Technology
(Tianjin) Co.,
Ltd.	367,021,142.55	0.00	0.00	367,021,142.55	0.00	0.00
LeTV Cultural
Development
(Beijing) Co.,
Ltd.	5,100,000.00	0.00	0.00	5,100,000.00	0.00	0.00
Letv Information
Technology
(Hong Kong)
Co., Ltd.	222,800,460.69	289,105,273.05	0.00	511,905,733.74	0.00	0.00
Dongyang LeTV
Flower Film &
TV Co., Ltd.	899,999,997.89	0.00	0.00	899,999,997.89	0.00	0.00
Khorgos Lehai
Culture Media
Co., Ltd.	0.00	10,000,000.00	0.00	10,000,000.00	0.00	0.00

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FINANCIAL INFORMATION OF LESHI INTERNET

					Provision	Balance of
					withdrawn for	provision for
					impairment in	impairment at
		Increase in the	Decrease in the		the current	the end of the
Invested entity	Opening balance	current period	**current period **	Ending balance	period	period
Leshi Zhixin
Electronic
Technology
(Tianjin)
Limited	613,133,767.00	14,923,667.53	0.00	628,057,434.53	0.00	0.00
Beijing LeTV
Streaming
Media
Advertising
Co., Ltd.	3,000,000.00	0.00	0.00	3,000,000.00	0.00	0.00
LeTV Sports
Culture
Development
(Beijing) Co.,
Ltd.	4,438,240.00	34,533,713.97	38,971,953.97	0.00	0.00	0.00
LeTV New Media
Culture
(Tianjin) Co.,
Ltd.	299,999,983.30	0.00	0.00	299,999,983.30	0.00	0.00
LeCloud
Computing Co.,
Ltd.	8,076,814.00	395,653,791.12	0.00	403,730,605.12	0.00	0.00
Total	2,424,070,405.43	744,216,445.67	38,971,953.97	3,129,314,897.13	0.00	0.00

• (2) Investment in associated enterprises and joint ventures

Unit: RMB

						**Increase/decrease in the current **	**Increase/decrease in the current **	**Increase/decrease in the current **	period
				Investment				Cash
				gains/losses				dividends or				Balance of
				recognized	Adjustments			profits	Provision			provision for
				based on		to other		announced to	withdrawn			impairment
Invested	Opening	Investment	Investment	equity	consolidated		Other equity	be	for		Ending	at the end of
entity	balance	added	reduced	method		revenue	changes	distributed	impairment	Others	balance	the period
I. Associated
enterprises
Beijing Zhiyi
Information
Technology
Co., Ltd.	0.0010,000,000.00		0.00	45,254.04		0.00				10,045,254.04		0.00
Total	10,000,000.0010,000,000.00		0.00	45,254.04		0.00				10,045,254.04		0.00

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Operating revenue and cost

Unit: RMB

		**Amount incurred **	in the current	**Amount incurred **	in the previous
Items		period		period
		Revenue	Cost	Revenue	Cost
Main	businesses	3,965,860,728.81	2,210,010,104.53	2,359,676,820.96	1,254,089,053.34
Total		3,965,860,728.81	2,210,010,104.53	2,359,676,820.96	1,254,089,053.34

5. Investment revenue

Unit: RMB

	Amount incurred in	Amount incurred in
Items	the current period	the previous period
Revenue from long-term equity investment stated
by equity method	45,254.04	-80,695.41
Revenue from disposal of long-term equity
investment	0.00	-589,158.46
Revenue from holding financial assets measured
at fair value with changes stated as current
gains/losses	0.00	0.00
Revenue from disposing financial assets
measured at fair value with changes stated as
current gains/losses	0.00	0.00
Revenue from holding held-to-maturity
investment	0.00	0.00
Revenue from holding available-for-sale financial
assets	0.00	0.00
Revenue from disposing available-for-sale
financial assets	14,165,684.11	0.00
Gains of remaining equity re-measured at fair
value after control right loss	0.00	0.00
Total	14,210,938.15	-669,853.87

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APPENDIX II

XVIII. Supplementary information

1. Schedule of non-recurring gains/losses in the current period

�Applicable □Not Applicable
		Unit: RMB
Items	Amount	Description
Gains/losses from disposal of non-current assets	-37,634,806.94
Government subsidies stated as current
gains/losses (except for those closely related to
company business and gained at a fixed
amount or quantity according to national
standard)	44,987,578.52
Gains/losses on contingencies irrelevant to the
Company’s normal business	-2,000,000.00
Gains/losses on change in fair value from
holding tradable financial assets and tradable
financial liabilities as well as investment
revenue from disposal of tradable financial
assets, tradable financial liabilities and
available-for-sale financial assets, except for
effective hedging related to normal businesses
of the Company	14,165,684.11
Non-operating revenue and expenses other than
the above	-606,382.46
Less: Effect of income tax	786,784.91
Effect of minority interests	30,906.96
Total	18,094,381.36	—

The Company should explain those non-recurring gains/losses defined according to Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public - Non-recurring Gains/Losses (the “Explanatory Announcement”) and explain the reason for defining those non-recurring gains/losses listed in the Explanatory Announcement as recurring gains/losses.

• Applicable � Not Applicable

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Return on equity and earnings per share

		**Earnings **	per share
		Basic earnings	Diluted earnings
	Weighted average	per share	per share
Profit in the reporting period	ROE	(RMB/share)	(RMB/share)
Net profit attributable to common
shareholders	16.17%	0.31	0.30
Net profit attributable to common
shareholders after deducting
non-recurring gains/losses	15.66%	0.30	0.29

3. Accounting data differences under domestic and overseas accounting standards

• (1) Differences in net profit and net assets in the financial report disclosed in accordance with international accounting standards as well as PRC accounting standards

□ Applicable � Not Applicable

• (2) Differences in net profit and net assets in the financial report disclosed in accordance with overseas accounting standards as well as PRC accounting standards

• Applicable � Not Applicable

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• C. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF LESHI INTERNET FOR THE YEAR ENDED 31 DECEMBER 2016

Section XI Financial Report

I. Audit report

Type of audit opinion Unqualified audit opinion with emphasis of matter paragraph Date of signing of audit report April 20th, 2017 Name of audit institution SHINEWING Certified Public Accountants (special general partnership) Reference number of audit report XYZH/2017XAA10323 Name of CPA Chang Xiaobo, Bai Ximin

Text of the Audit Report

All shareholders of Leshi Internet Information & Technology Corp (Beijing):

We have audited the attached financial statements of Leshi Internet Information & Technology Corp (Beijing) (hereinafter referred to as Letv), including the consolidated and parent company’s balance sheets as at December 31st, 2016, the consolidated and parent company’s income statements, the consolidated and parent company’s cash flow statements, the consolidated and parent company’s statements of changes in owners’ equity for the year 2016, and notes to financial statements.

I. Management’s responsibility for the financial statements

Preparing and fairly presenting financial statements are responsibilities of the Letv’s management. These responsibilities include (1) preparing the financial statements in accordance with the provisions of Accounting Standards for Business Enterprises, which achieve fair presentation in the meantime; and (2) designing, implementing and maintaining necessary internal control to avoid material misstatement in the financial statements resulting from fraudulence or mistakes.

II. Responsibility of CPAs

Our responsibility is to provide audit opinions on the financial statements based on our audit. We have performed the audit in accordance with the provisions of the China’s Independent Auditing Standards. The standards contained thereof require that we shall abide by the code of professional ethics for CPAs of China, plan and perform the audit to obtain reasonable assurance about whether or not the financial statements are free from material misstatement.

Our audit work includes implementing the audit procedure to obtain audit evidence relating to the amounts and disclosure of the financial statements. The audit procedure selected depends on the judgment of the CPAs, including assessment of the risk of material misstatement resulting from fraudulence or mistakes. While engaging in risk assessment, CPAs took into consideration the internal

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APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

control related to preparation and fair presentation of financial statements, with the purpose of designing proper audit procedure, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. The audit also includes assessing the appropriateness of accounting policies used and the rationality of the accounting estimates made by the management, as well as evaluating the overall presentation of the financial statements.

We believe the audit evidence we obtained is adequate and appropriate and provides a basis for us to give our audit opinions.

III. Audit opinions

In our opinion, the financial statements of Letv are, in all material respects, prepared in accordance with the provisions of Accounting Standards for Business Enterprises, and fairly present the consolidated and parent company’s financial position of Letv as at December 31st, 2016 as well as the consolidated and parent company’s operating results and cash flow in 2016.

IV. Emphasis of matter

We remind users of the financial statements to note the descriptions in Note XII. 7.(1) to financial statements. The contents in this paragraph will not affect the audit opinions already published.

SHINEWING Certified Public Accountants (special general partnership)

Certified Public Accountant of China: Chang Xiaobo Certified Public Accountant of China: Bai Ximin

Beijing, China April 19th, 2017

— 296 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

II. Financial statements

The unit in the notes to financial statements is RMB.

1. Consolidated balance sheet

Prepared by: Leshi Internet Information & Technology Corp (Beijing)

Items Current assets: Monetary funds Settlement provision Lendings Financial assets measured at fair value with changes stated as current gains/losses Derivative financial assets Notes receivable Accounts receivable Advance payment Premiums receivable Reinsurance accounts receivable Reinsurance contract reserves receivable Interests receivable Dividends receivable Other receivables Financial assets held under resale agreements Inventories Assets classified as held for sale Non-current assets maturing within one year Other current assets Total current assets	Ending balance 3,669,146,356.08 5,884,729.45 8,685,855,147.64 619,331,275.54 18,110,043.99 696,016,127.29 945,179,396.74 1,229,643,291.40 15,869,166,368.13	Unit: RMB Opening balance 2,729,778,115.14 909,130,941.24 3,359,683,070.34 518,179,809.89 165,620,378.93 1,138,787,425.07 290,616,467.33
		9,111,796,207.94

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APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Non-current assets: Issue of loans and advances Available-for-sale financial assets Held-to-maturity investments Long-term receivables Long-term equity investment Investment real estate Fixed assets Construction in progress Project materials Disposal of fixed assets Production-type biological assets Oil and gas assets Intangible assets Development expenses Goodwill Long-term expenses to be amortized Deferred tax assets Other non-current assets Total non-current assets Total assets	Ending balance 714,141,820.24 1,690,529,135.86 2,070,302,115.59 1,140,315,635.02 6,882,018,054.48 696,578,154.59 747,585,265.47 1,546,403.16 763,343,422.11 1,658,299,634.42 16,364,659,640.94 32,233,826,009.07	Opening balance 159,529,787.23 10,045,254.04 629,348,189.66 4,879,832,445.98 424,155,254.98 747,585,265.47 1,082,073.15 507,251,454.37 511,528,626.09
		7,870,358,350.97
		16,982,154,558.91

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Items Current liabilities: Short-term loans Loans from the central bank Deposits accepted and deposits from banks and other financial institutions Placements from banks and other financial institutions Financial liabilities measured at fair value with changes stated as current gains/losses Derivative financial liabilities Notes payable Accounts payable Advance receipts Financial assets sold for repurchase Fees and commissions payable Remuneration payable to employees Taxes payable Interests payable Dividends payable Other payables Reinsurance accounts payable Insurance contract reserve Funds from securities trading agency Funds from securities underwriting agency Liabilities classified as held for sale Non-current liabilities maturing within one year Other current liabilities Total current liabilities	Ending balance 2,600,361,000.00 226,884,006.72 5,421,247,492.09 182,669,921.06 409,140,706.62 9,609,937.09 774,198,911.49 81,875,727.03 25,850,903.00 105,029,678.68 2,646,401,713.50 12,483,269,997.28	Opening balance 1,735,000,000.00 3,230,743,322.86 1,733,076,250.81 5,157,677.11 577,549,772.36 52,645,206.38 19,370,692.86 98,975,701.57
		7,452,518,623.95

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APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Non-current liabilities: Long-term loans Bonds payable Including: Preferred shares Perpetual bonds Long-term payables Long-term remuneration payable to employees Special payables Accrued liability Deferred earnings Deferred tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities Owners’ equity: Share capital Other equity instruments Including: Preferred shares Perpetual bonds Capital reserve Less: Treasury shares Other consolidated revenue Special reserves Surplus reserve General risk reserves Undistributed profit Total equity attributable to owners of the parent company Minority interests Total owners’ equity Total liabilities and owners’ equity	Ending balance 3,024,445,808.89 1,900,558,350.60 142,094,227.63 483,948,010.67 3,037,852.42 5,615,277,372.62 9,268,803,272.23 21,752,073,269.51 1,981,680,127.00 6,197,235,638.19 54,771,627.69 286,311,762.59 1,705,569,136.37 10,225,568,291.84 256,184,447.72 10,481,752,739.56 32,233,826,009.07	Opening balance 300,000,000.00 34,559,489.87 557,580.45 6,489,861.73 3,472,336,372.62
		5,714,501,655.27
		13,167,020,279.22
		1,856,015,158.00 549,148,989.30 27,837,143.24 179,165,369.15 1,315,492,772.28
		3,927,659,431.97
		-112,525,152.28
		3,815,134,279.69
		16,982,154,558.91

Legal representative: Person in charge of accounting: Officer-in-charge of accounting Jia Yueting Yang Lijie institution: Li Yongchao

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APPENDIX II

2. Balance sheet of the parent company

Items Current assets: Monetary funds Financial assets measured at fair value with changes stated as current gains/losses Derivative financial assets Notes receivable Accounts receivable Advance payment Interests receivable Dividends receivable Other receivables Inventories Assets classified as held for sale Non-current assets maturing within one year Other current assets Total current assets Non-current assets: Available-for-sale financial assets Held-to-maturity investments Long-term receivables Long-term equity investment Investment real estate Fixed assets Construction in progress Project materials Disposal of fixed assets Production-type biological assets Oil and gas assets Intangible assets Development expenses Goodwill Long-term expenses to be amortized Deferred tax assets Other non-current assets Total non-current assets Total assets	Ending balance 1,116,976,098.00 500,000.00 5,253,090,438.46 48,732,195.32 5,307,409,066.04 26,739,708.87 68,084,088.58 11,821,531,595.27 76,581,116.97 3,851,310,541.39 287,840,432.86 2,117,604,688.60 79,741,741.33 53,298,607.38 722,659,989.63 7,189,037,118.16 19,010,568,713.43	Unit: RMB Opening balance 1,629,291,968.20 7,099,028.00 3,541,546,789.55 372,777,659.68 2,631,657,845.10 32,492,194.03 41,253,662.61
		8,256,119,147.17
		66,581,116.97 3,139,360,151.17 204,245,182.49 1,352,753,246.56 87,258,168.47 26,620,486.68 250,392,318.01
		5,127,210,670.35
		13,383,329,817.52

— 301 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Current liabilities: Short-term loans Financial liabilities measured at fair value with changes stated as current gains/losses Derivative financial liabilities Notes payable Accounts payable Advance receipts Remuneration payable to employees Taxes payable Interests payable Dividends payable Other payables Liabilities classified as held for sale Non-current liabilities maturing within one year Other current liabilities Total current liabilities Non-current liabilities: Long-term loans Bonds payable Including: Preferred shares Perpetual bonds Long-term payables Long-term remuneration payable to employees Special payables Accrued liability Deferred earnings Deferred tax liabilities Other non-current liabilities Total non-current liabilities Total liabilities	Ending balance 2,505,361,000.00 226,884,006.72 1,036,681,687.40 9,511,420.22 820,726.71 638,652,615.76 67,879,476.17 25,850,903.00 1,383,821,401.45 2,280,323,284.84 8,175,786,522.27 75,651,634.84 3,244,493.96 3,037,852.42 436,336,372.62 518,270,353.84 8,694,056,876.11	Opening balance 1,385,000,000.00 250,000,000.00 690,995,335.51 52,545,768.17 1,664,625.79 400,298,017.46 52,645,206.38 505,825,659.72 98,975,701.57
		3,437,950,314.60
		300,000,000.00 1,900,558,350.60 34,559,489.87 557,580.45 1,401,579.29 3,472,336,372.62
		5,709,413,372.83
		9,147,363,687.43

— 302 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Owners’ equity: Share capital Other equity instruments Including: Preferred shares Perpetual bonds Capital reserve Less: Treasury shares Other consolidated revenue Special reserves Surplus reserve Undistributed profit Total owners’ equity Total liabilities and owners’ equity	Ending balance 1,981,680,127.00 5,666,254,667.15 286,311,762.59 2,382,265,280.58 10,316,511,837.32 19,010,568,713.43	Opening balance 1,856,015,158.00 725,301,393.37 179,165,369.15 1,475,484,209.57
		4,235,966,130.09
		13,383,329,817.52

— 303 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Consolidated income statement

				Unit: RMB
			Amount incurred	Amount incurred
			in the current	in the previous
Items			period	period
I.	Total operating revenue		21,986,878,491.37	13,016,725,124.12
	Including: Operating revenue		21,950,951,410.47	13,016,725,124.12
		Interest revenue	35,927,080.90
		Earned premium
		Fee and commission revenue
II.	Total operating cost		22,361,014,855.09	13,026,051,728.75
	Including: Operating cost		18,229,220,564.66	11,112,009,123.84
		Interest expenses	16,283,747.53
		Fee and commission expense	783,554.77
		Surrender value
		Net amount of compensation payout
		Net amount of reserves for insurance contract
		Policy dividend payment
		Reinsurance cost
		Taxes and surcharges	152,575,155.84	94,680,829.11
		Sales expenses	2,365,883,026.28	1,040,736,778.35
		Administrative expenses	596,273,473.81	309,492,095.22
		Financial expenses	648,027,100.05	348,979,599.08
		Asset impairment loss	351,968,232.15	120,153,303.15
	Plus: Revenue from change in fair value (“-” for loss)
		Investment revenue (“-” for loss)	36,637,102.64	78,749,437.60
		Including: Revenue from investment in associated
		enterprises and joint ventures	35,828,908.50	45,254.04
		Exchange revenue (“-” for loss)
III.	Operating profit (“-” for loss)		-337,499,261.08	69,422,832.97
	Plus: Non-operating revenue		46,601,816.72	44,987,912.96
		Including: Gain from disposal of non-current assets
	Less: Non-operating expense		37,811,076.51	40,241,523.84
		Including: Loss from disposal of non-current assets	35,423,474.44	37,634,806.94
IV.	Total profit (“-” for total loss)		-328,708,520.87	74,169,222.09
	Less: Income tax expense		-106,815,889.16	-142,947,603.47
V.	Net profit (“-” for net loss)		-221,892,631.71	217,116,825.56
	Net profit attributable to owners of the parent
		company	554,759,227.43	573,027,173.33
	Gains/losses of minority shareholders		-776,651,859.14	-355,910,347.77

— 304 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

			Amount incurred	Amount incurred
			in the current	in the previous
Items			period	period
VI.	After-tax net amount of other consolidated revenue		26,934,484.45	28,543,786.73
	After-tax net amount of other consolidated revenue
	attributable to owners of the parent company		26,934,484.45	28,543,786.73
	(I)	Other consolidated revenue that cannot be
		reclassified into profits/losses
		1. Changes arising from re-measurement of
		net liabilities or net assets of defined
		benefit plan
		2. Share in other consolidated revenue of
		the invested entity that cannot be
		reclassified into profits/losses under the
		equity method
	(II)	Other consolidated revenue that will be
		reclassified into profits/losses	26,934,484.45	28,543,786.73
		1. Share in other consolidated revenue of
		the invested entity that will be
		reclassified into profits/losses under the
		equity method
		2. Gains/losses from change in fair value of
		available-for-sale financial assets	-20,791,923.32	5,072,950.59
		3. Held-to-maturity investment reclassified
		as gains/losses from available-for-sale
		financial assets
		4. Operational factors of cash flow hedging
		gains/losses
		5. Translation difference of foreign-currency
		financial statements	47,726,407.77	23,470,836.14
		6. Others
	After-tax net amount of other consolidated revenue
	attributable to minority shareholders
VII.	Total	consolidated revenue	-194,958,147.26	245,660,612.29
	Total	consolidated revenue attributable to owners of
	the	parent company	581,693,711.88	601,570,960.06
	Total	consolidated revenue attributable to minority
	shareholders		-776,651,859.14	-355,910,347.77

— 305 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

		Amount incurred	Amount incurred
		in the current	in the previous
Items		period	period
VIII. Earnings per share:
(I)	Basic earnings per share	0.29	0.31
(II)	Diluted earnings per share	0.29	0.30

For merger of enterprises under the same control in the current period, net profit realized by the merged party before merger was RMB0.00; net profit realized by the merged party in the last period was RMB0.00.

Legal representative: Person in charge of accounting: Officer-in-charge of accounting Jia Yueting Yang Lijie institution: Li Yongchao

— 306 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Income statement of the parent company

			Unit: RMB
		Amount incurred	Amount incurred
		in the current	in the previous
Items		period	period
I.	Operating revenue	5,239,131,213.57	3,965,860,728.81
	Less: Operating cost	2,584,571,147.94	2,210,010,104.53
	Taxes and surcharges	134,135,560.76	89,020,874.72
	Sales expenses	505,982,257.69	430,772,864.75
	Administrative expenses	283,272,155.15	193,262,730.00
	Financial expenses	372,815,679.64	251,449,398.99
	Asset impairment loss	177,252,095.13	100,302,254.70
	Plus: Revenue from change in fair value (“-” for loss)
	Investment revenue (“-” for loss)	234,174.01	14,210,938.15
	Including: Revenue from investment in associated
	enterprises and joint ventures	234,174.01	45,254.04
II.	Operating profit (“-” for loss)	1,181,336,491.27	705,253,439.27
	Plus: Non-operating revenue	5,316,277.23	21,878,100.00
	Including: Gain from disposal of non-current assets
	Less: Non-operating expense	30,751,005.32	32,021,151.37
	Including: Loss from disposal of non-current assets	30,746,461.27
III.	Total profit (“-” for total loss)	1,155,901,763.18	695,110,387.90
	Less: Income tax expense	84,437,828.83	73,110,298.64
IV.	Net profit (“-” for net loss)	1,071,463,934.35	622,000,089.26

— 307 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Items

Amount incurred Amount incurred in the current in the previous period period

• V. After-tax net amount of other consolidated revenue

• (I) Other consolidated revenue that cannot be reclassified into profits/losses

  1. Changes arising from re-measurement of net liabilities or net assets of defined

     • benefit plan

  2. Share in other consolidated revenue of the invested entity that cannot be reclassified into profits/losses under the equity method

• (II) Other consolidated revenue that will be reclassified into profits/losses

  1. Share in other consolidated revenue of the invested entity that will be reclassified into profits/losses under the equity method

  2. Gains/losses from change in fair value of available-for-sale financial assets

  3. Held-to-maturity investment reclassified as gains/losses from available-for-sale financial assets

financial assets
4. Operational factors of cash flow hedging gains/losses 5. Translation difference of foreign-currency financial statements 6. Others VI. Total consolidated revenue VII. Earnings per share: (I) Basic earnings per share (II) Diluted earnings per share	1,071,463,934.35 0.56 0.55
		622,000,089.26
		0.34
		0.33

— 308 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Consolidated cash flow statement

Items I. Cash flows from operating activities: Cash received from sales of goods and provision of labor service Net increase in deposits from customers and banks and other financial institutions Net increase in loans from the central bank Net increase in placements from other financial institutions Cash premiums received from original insurance contracts Net cash received from reinsurance business Net increase in deposits from policyholders and investment funds Net increase from disposal of financial assets measured at fair value with changes stated as current gains/losses Cash received from interests, fees and commissions Net increase in placements from banks and other financial institutions Net increase in repurchase business capital Tax refunds received Other cash received relating to operating activities Subtotal of cash inflows from operating activities Cash paid for purchase of goods and acceptance of labor service Net increase in loans and advances to customers Net increase in deposits with central bank and other financial institutions Cash paid for original insurance contract claims Cash paid for interests, fees and commissions Cash paid for policy dividends Cash paid to and for employees Taxes paid Other cash paid relating to operating activities Subtotal of cash outflows for operating activities Net cash flows from operating activities	Amount incurred in the current period 14,634,188,704.16 20,665,727.50 409,140,706.62 30,288,787.69 682,734,841.98 15,777,018,767.95 12,721,979,030.65 721,355,373.98 9,876,249.47 1,098,193,418.77 404,567,218.99 1,889,108,245.05 16,845,079,536.91 -1,068,060,768.96	Unit: RMB Amount incurred in the previous period 10,044,744,599.42 1,127,498.50 113,285,059.83 10,159,157,157.75 7,562,564,647.71 595,428,336.05 257,620,152.08 867,842,145.45
		9,283,455,281.29
		875,701,876.46

— 309 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Items II. Cash flows from investing activities: Cash received from taking back investments Cash received from investment revenue Net cash received from disposal of fixed assets, intangible assets and other long-term assets Net cash received from disposal of subsidiaries and other operating entities Other cash received relating to investing activities Subtotal of cash inflows from investing activities Cash paid for purchase and construction of fixed assets, intangible assets and other long-term assets Cash paid for investments Net increase in pledge loans Net cash paid for acquisition of subsidiaries and other operating entities Other cash paid relating to investing activities Subtotal of cash outflows for investing activities Net cash flows from investing activities III. Cash flows from financing activities: Cash received from introducing investment Including: Cash received by subsidiaries from investments of minority shareholder Cash received for obtaining loans Cash received from issue of bonds Other cash received relating to financing activities Subtotal of cash inflows from financing activities Cash paid for repayment of debts Cash paid for distribution of dividends and profit or repayment for interests Including: Dividend and profit paid by subsidiaries to minority shareholders Other cash paid relating to financing activities Subtotal of cash outflows for financing activities Net cash flows from financing activities IV. Effect of exchange rate change on cash and cash equivalents V. Net increase in cash and cash equivalents Plus: Opening balance of cash and cash equivalents VI. Ending balance of cash and cash equivalents	Amount incurred in the current period 1,085,270.85 37,510.84 122,100,000.00 123,222,781.69 5,469,946,151.56 3,658,780,609.39 669,875,613.00 9,798,602,373.95 -9,675,379,592.26 11,144,513,209.84 6,289,562,680.80 272,457,387.26 17,706,533,277.90 4,947,098,220.15 436,124,661.05 2,845,810,622.70 8,229,033,503.90 9,477,499,774.00 20,370,447.08 -1,245,570,140.14 2,714,778,115.14 1,469,207,975.00	Amount incurred in the previous period 56,556,521.11 4,350.68
		56,560,871.79 2,809,349,736.56 142,228,000.00 89,733,291.83
		3,041,311,028.39
		-2,984,750,156.60
		47,910,284.84 9,046,574,441.04 1,895,260,000.00 400,933,888.89
		11,390,678,614.77 6,746,926,238.50 144,106,767.40 134,296,501.87
		7,025,329,507.77
		4,365,349,107.00
		11,128,692.65 2,267,429,519.51 447,348,595.63
		2,714,778,115.14

— 310 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Cash flow statement of the parent company

Items I. Cash flows from operating activities: Cash received from sales of goods and provision of labor service Tax refunds received Other cash received relating to operating activities Subtotal of cash inflows from operating activities Cash paid for purchase of goods and acceptance of labor service Cash paid to and for employees Taxes paid Other cash paid relating to operating activities Subtotal of cash outflows for operating activities Net cash flow from operating activities II. Cash flows from investing activities: Cash received from taking back investments Cash received from investment revenue Net cash received from disposal of fixed assets, intangible assets and other long-term assets Net cash received from disposal of subsidiaries and other operating entities Other cash received relating to investing activities Subtotal of cash inflows from investing activities Cash paid for purchase and construction of fixed assets, intangible assets and other long-term assets Cash paid for investments Net cash paid for acquisition of subsidiaries and other operating entities Other cash paid relating to investing activities Subtotal of cash outflows for investing activities Net cash flows from investing activities	Amount incurred in the current period 3,841,264,138.83 176,175,935.74 4,017,440,074.57 1,952,699,269.19 587,307,953.79 169,737,602.30 2,985,138,417.83 5,694,883,243.11 -1,677,443,168.54 17,853.96 17,853.96 1,877,892,419.33 674,566,778.87 522,894,545.21 3,075,353,743.41 -3,075,335,889.45	Unit: RMB Amount incurred in the previous period 2,307,191,168.24 363,569,210.08
		2,670,760,378.32 1,095,175,718.00 384,955,488.39 182,440,646.31 1,693,533,421.61
		3,356,105,274.31
		-685,344,895.99
		6,556,521.11 4,350.68
		6,560,871.79 1,428,484,234.70 356,405,273.05
		1,784,889,507.75
		-1,778,328,635.96

— 311 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Items Amount incurred in the current period III. Cash flows from financing activities: Cash received from introducing investment 4,843,822,209.84 Cash received for obtaining loans 2,945,116,871.91 Cash received from issue of bonds 1,895,260,000.00 Other cash received relating to financing activities 1,896,579,504.16 Subtotal of cash inflows from financing activities 9,685,518,585.91 Cash paid for repayment of debts 4,841,233,642.91 Cash paid for distribution of dividends and profit or repayment for interests 286,036,334.53 Other cash paid relating to financing activities 359,550,622.70 Subtotal of cash outflows for financing activities 5,486,820,600.14 Net cash flows from financing activities 4,198,697,985.77 IV. Effect of exchange rate change on cash and cash equivalents V. Net increase in cash and cash equivalents -554,081,072.22 Plus: Opening balance of cash and cash equivalents 1,614,291,968.20 VI. Ending balance of cash and cash equivalents 1,060,210,895.98	Amount incurred in the previous period 29,910,284.84 9,046,574,441.04 95,348,888.89
	11,067,093,614.77 6,726,926,238.50 143,702,478.51 393,418,627.08
	7,264,047,344.09
	3,803,046,270.68
	1,339,372,738.73 274,919,229.47
	1,614,291,968.20

— 312 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Unit: RMB				Minority Total	interests owners’ equity	-112,525,152.28 3,815,134,279.69										-112,525,152.28 3,815,134,279.69			368,709,600.00 6,666,618,459.87	-776,651,859.14 -194,958,147.26		629,890,075.17 6,090,542,090.84			608,825,999.72 5,955,630,224.65						21,064,075.45 134,911,866.19		-57,536,469.90						-57,536,469.90																				515,471,383.97 828,570,986.19		256,184,447.72 10,481,752,739.56
				Undistributed	profit	1,315,492,772.28										1,315,492,772.28			390,076,364.09	554,759,227.43													-164,682,863.34		-107,146,393.44				-57,536,469.90																						1,705,569,136.37
			General	risk	reserves
				Surplus	reserve	179,165,369.15										179,165,369.15			107,146,393.44														107,146,393.44		107,146,393.44																										286,311,762.59
				Special	reserves
	Current period	Equity attributable to owners of the parent company	Less: Other	Capital Treasury consolidated	reserve shares revenue	549,148,989.30 27,837,143.24										549,148,989.30 27,837,143.24			5,648,086,648.89 26,934,484.45	26,934,484.45		5,334,987,046.67			5,240,161,256.93						94,825,789.74																												313,099,602.22		6,197,235,638.19 54,771,627.69
					Others
			Other equity instruments		Preferred shares Perpetual bonds
					Share capital	1,856,015,158.00										1,856,015,158.00			125,664,969.00			125,664,969.00			106,642,968.00						19,022,001.00																														1,981,680,127.00
			Items			I. Ending balance of last year	Plus: Changes in accounting		policies	Correction of previous errors	Merger of enterprise under the	same control	Others	II. Opening balance of this		year	III. Increases/decreases of the	current period	(“-” for decrease)	(I) Total consolidated revenue	(II) Owners’ capital injected	and reduced	1. Ordinary shares invested by		shareholders	2. Capital invested by holders		of other equity instruments	3. Amounts of share-based	payments included in	owners’ equity	4. Others	(III) Profit distribution	1. Withdrawal of surplus	reserves	2. Withdrawal of general risk	reserves	3. Distribution to owners (or	shareholders)	4. Others	(IV) Internal carryover of	owners’ equity	1. Transfer of capital reserves	into paid-in capital (or		share capital)	2. Transfer of surplus reserves	into paid-in capital (or		share capital)	3. Surplus reserves for making	up losses	4. Others	(V) Special reserves	1. Withdrawal in the current	period	2. Use in the current period		(VI) Others	IV. Ending balance of the	current period

— 313 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Unit: RMB			Total owners’	Minority interests equity		176,645,737.73 3,343,473,396.02										176,645,737.73 3,343,473,396.02				-289,170,890.01 471,660,883.67	-355,910,347.77 245,660,612.29		66,739,457.76 146,561,931.39			18,000,000.00 42,513,264.84						55,309,208.79	48,739,457.76 48,739,457.76	-38,694,742.90						-38,694,742.90																	118,133,082.89		-112,525,152.28 3,815,134,279.69
				Undistributed	profit	843,360,350.78										843,360,350.78				472,132,421.50	573,027,173.33													-100,894,751.83		-62,200,008.93				-38,694,742.90																			1,315,492,772.28
				General risk	reserves
					Surplus reserve	116,965,360.22										116,965,360.22				62,200,008.93														62,200,008.93		62,200,008.93																							179,165,369.15
	Previous period	Equity attributable to owners of the parent company	Less: Treasury Other consolidated		Capital reserve shares revenue Special reserves	1,366,018,527.78 -706,643.49										1,366,018,527.78 -706,643.49				-816,869,538.48 28,543,786.73	28,543,786.73		74,425,453.63			24,513,264.84						49,912,188.79											-1,009,428,075.00			-1,009,428,075.00											118,133,082.89		549,148,989.30 27,837,143.24
					Others
				Other equity instruments	Preferred shares Perpetual bonds
					Share capital	841,190,063.00										841,190,063.00				1,014,825,095.00			5,397,020.00									5,397,020.00											1,009,428,075.00			1,009,428,075.00													1,856,015,158.00
				Items		I. Ending balance of last year	Plus: Changes in accounting		policies	Correction of previous errors	Merger of enterprise under the	same control	Others	II. Opening balance of this		year	III. Increases/decreases of the	current period (“-” for		decrease)	(I) Total consolidated revenue	(II) Owners’ capital injected	and reduced	1. Ordinary shares invested by		shareholders	2. Capital invested by holders		of other equity instruments	3. Amounts of share-based	payments included in	owners’ equity	4. Others	(III) Profit distribution	1. Withdrawal of surplus	reserves	2. Withdrawal of general risk	reserves	3. Distribution to owners (or	shareholders)	4. Others	(IV) Internal carryover of	owners’ equity	1. Transfer of capital reserves	into paid-in capital (or	share capital)	2. Transfer of surplus reserves	into paid-in capital (or	share capital)	3. Surplus reserves for making	up losses	4. Others	(V) Special reserves	1. Withdrawal in the current	period	2. Use in the current period	(VI) Others	IV. Ending balance of the	current period

— 314 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

	Unit: RMB			Undistributed Total owners’	Surplus reserve profit equity	179,165,369.15 1,475,484,209.57 4,235,966,130.09								179,165,369.15 1,475,484,209.57 4,235,966,130.09				107,146,393.44 906,781,071.01 6,080,545,707.23		1,071,463,934.35 1,071,463,934.35		4,975,292,090.84			4,840,380,224.65						134,911,866.19		107,146,393.44 -164,682,863.34 -57,536,469.90		107,146,393.44 -107,146,393.44		-57,536,469.90 -57,536,469.90																			91,326,151.94		286,311,762.59 2,382,265,280.58 10,316,511,837.32
					Special reserves
			Other	consolidated	revenue
		Current period		Less: Treasury	shares
					Capital reserve	725,301,393.37								725,301,393.37				4,940,953,273.78				4,849,627,121.84			4,733,737,256.65						115,889,865.19																									91,326,151.94		5,666,254,667.15
				Other equity instruments	Preferred shares Perpetual bonds Others
Amount in the current period					Items Share capital	I. Ending balance of last year 1,856,015,158.00	Plus: Changes in accounting		policies	Correction of previous errors	Others	II. Opening balance of this		year 1,856,015,158.00	III. Increases/decreases of the	current period (“-” for		decrease) 125,664,969.00	(I) Total consolidated	revenue	(II) Owners’ capital injected	and reduced 125,664,969.00	1. Ordinary shares invested		by shareholders 106,642,968.00	2. Capital invested by holders		of other equity instruments	3. Amounts of share-based	payments included in	owners’ equity 19,022,001.00	4. Others	(III) Profit distribution	1. Withdrawal of surplus	reserves	2. Distribution to owners (or	shareholders)	3. Others	(IV) Internal carryover of	owners’ equity	1. Transfer of capital reserves	into paid-in capital (or		share capital)	2. Transfer of surplus	reserves into paid-in	capital (or share capital)	3. Surplus reserves for	making up losses	4. Others	(V) Special reserves	1. Withdrawal in the current	period	2. Use in the current period		(VI) Others	IV. Ending balance of the	current period 1,981,680,127.00

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Unit: RMB			Undistributed Total owners’	Surplus reserve profit equity	116,965,360.22 954,378,872.14 3,362,450,229.36								116,965,360.22 954,378,872.14 3,362,450,229.36				62,200,008.93 521,105,337.43 873,515,900.73		622,000,089.26 622,000,089.26		172,077,471.48			24,513,264.84						61,832,497.96		62,200,008.93 -100,894,751.83 -38,694,742.90		62,200,008.93 -62,200,008.93		-38,694,742.90 -38,694,742.90																	118,133,082.89		179,165,369.15 1,475,484,209.57 4,235,966,130.09
				Special reserves
		Other	consolidated	revenue
	Previous period		Less: Treasury	shares
				Capital reserve	1,449,915,934.00								1,449,915,934.00				-724,614,540.63				166,680,451.48			24,513,264.84						56,435,477.96	85,731,708.68								-1,009,428,075.00			-1,009,428,075.00											118,133,082.89		725,301,393.37
			Other equity instruments	Preferred shares Perpetual bonds Others
				Share capital	841,190,063.00								841,190,063.00				1,014,825,095.00				5,397,020.00									5,397,020.00									1,009,428,075.00			1,009,428,075.00													1,856,015,158.00
				Items	I. Ending balance of last year	Plus: Changes in accounting		policies	Correction of previous errors	Others	II. Opening balance of this		year	III. Increases/decreases of the	current period (“-” for		decrease)	(I) Total consolidated	revenue	(II) Owners’ capital injected	and reduced	1. Ordinary shares invested		by shareholders	2. Capital invested by holders		of other equity instruments	3. Amounts of share-based	payments included in	owners’ equity	4. Others	(III) Profit distribution	1. Withdrawal of surplus	reserves	2. Distribution to owners (or	shareholders)	3. Others	(IV) Internal carryover of	owners’ equity	1. Transfer of capital reserves	into paid-in capital (or	share capital)	2. Transfer of surplus	reserves into paid-in	capital (or share capital)	3. Surplus reserves for	making up losses	4. Others	(V) Special reserves	1. Withdrawal in the current	period	2. Use in the current period	(VI) Others	IV. Ending balance of the	current period

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APPENDIX II

III. Basic information of the Company

Leshi Internet Information & Technology Corp (Beijing) (hereinafter referred to as the Company or Letv, collectively referred to as the Group when the subsidiaries are included) was formerly known as Beijing Letv Star Information Technology Co., Ltd., which was established in Beijing upon approval by Beijing Administration for Industry and Commerce in November 2004. At the time of establishment, the Company’s initial registered capital was RMB50 million, in which Jia Yueting (a natural person) contributed RMB45 million, accounting for 90.00% of the Company’s registered capital, Jia Yuefang (a natural person) contributed RMB100,000, accounting for 0.20% of the Company’s registered capital and Beijing Xbell Communication Technology Co., Ltd. invested RMB4.9 million, accounting for 9.80% of the Company’s registered capital. In August 2010, the Company, upon approval by the China Securities Regulatory Commission (CSRC), issued 25 million RMB common stocks to the public for the first time and was listed on Shenzhen Stock Exchange, with stock code of 300104. After the public offering, share distribution, transfer and allotment and exercise of stock options, the Company’s registered capital was RMB1,856,015,158 as at the end of the reporting period.

The Company’s unified social credibility code: 911100007693890511.

The Company’s registered address: Room No. 6184, Floor 6, Building 19, No. 68, Xueyuan South Road, Haidian District, Beijing City

The Company’s legal representative: Jia Yueting

Business scope of the Company: Internet information services (including issuance of Internet advertisements); information services in the second-class value-added telecommunication services (excluding fixed-line telephone information services and Internet information services); production and publication of cartoons, features and TV entertainment programs, excluding broadcasting and TV programs such as political news, similar features and special columns (the broadcasting and TV program and television drama production license is valid until December 28th, 2017); development of computer hardware and software; computer system services; sales of computer software, hardware and auxiliary equipment, clothing, shoes and hats, leather products, textiles, daily necessities, toys, stationery, sports goods, household electrical appliances, jewelry, cars and auto parts; Internet cultural activities. (Internet cultural activities and any project that needs to be approved according to laws can only be carried out according to the approved items upon approval by relevant authorities.)

The Company’s main business is to provide network video services, network terminal equipment and value-added services of video platform.

As at December 31st, 2016, there were 15 subsidiaries covered in the Company’s consolidated financial statements: LeTV Information Technology (Tianjin) Co., Ltd., Beijing LeTV Streaming Media Advertising Co., Ltd., Letv Information Technology (Hong Kong) Co., Ltd., LeTV Information Technology (Shanghai) Co., Ltd., Leshi Zhixin Electronic Technology (Tianjin) Limited, LeTV Cultural Development (Beijing) Co., Ltd., LeTV New Media Culture (Tianjin) Co., Ltd., Dongyang LeTV Flower Film & TV Co., Ltd., LeCloud Computing Co., Ltd., LeTV E-commerce (Beijing) Co., Ltd., Khorgos Letv New Generation Culture Media Co., Ltd., LeTV Fortune (Beijing) Information

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Technology Co., Ltd. and Lexiang Holdings Co., Ltd., Chongqing Letv Microcredit Co., Ltd. and Letv Yuanchuang (Beijing) Culture Media Co., Ltd. As the Company lost control over LeTV E-commerce (Beijing) Co., Ltd. in December 2016, the income statement and cash flow statement were included in the consolidation scope in the year and the ending balance of the balance sheet was no longer included in the consolidation scope. Letv Yuanchuang (Beijing) Culture Media Co., Ltd. did not carry out any business in the year, had no statements, and was not included in the consolidation scope in the year.

Refer to “VIII. Change of consolidation scope” and “IX. Equity in other entities” of the notes for details.

IV. Basis for preparation of financial statements

1. Basis for preparation

The Group prepared the financial statements on the basis of continuous operation and according to the transactions and events actually incurred, the Accounting Standards for Business Enterprises and relevant provisions issued by the Ministry of Finance, as well as the accounting policies and accounting estimates in “V. Important accounting policies and accounting estimates” of the notes.

2. Continuous operation

The Group has evaluated the continuous operation ability in the 12 months from the end of the reporting period and has not found any material matter that affects the Company’s continuous operation ability. Therefore, the Group deems it reasonable for it to prepare the financial statements based on continuous operation.

V. Important accounting policies and accounting estimates

Whether the Company needs to comply with the disclosure requirements for special industries

Yes

Internet video industry

Notes for specific accounting policies and accounting estimates:

1. Statement of compliance with accounting standards for business enterprises

The financial statements prepared by the Group comply with the requirements of the Accounting Standards for Business Enterprises and give a true and complete view of the financial position, operating results and cash flow and other relevant information of the Company and the Group.

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APPENDIX II

1. Accounting period

The Group’s accounting period is from January 1st to December 31st of each Gregorian calendar year.

3. Operating cycle

The Group’s operating cycle is one year.

1. Recording currency

The Group adopts RMB as the recording currency.

1. Accounting for merger of enterprises under the same control and not under the same control

The assets and liabilities that the Group obtains as a merging party in the merger of enterprises under the same control should be measured on the basis of the book value of the merged party in the consolidated statements of the ultimate controller on the date of merger. The difference between the book value of net assets obtained and the book value of the paid consideration should be used to adjust capital reserve. If the capital reserve is insufficient for write-down, the retained earnings should be adjusted.

Identifiable assets or liabilities and contingent liabilities of the acquiree obtained from merger of enterprises not under the same control should be measured at fair value on the date of acquisition. Merger cost is the sum of fair value of cash or non-cash assets paid, liabilities issued or undertaken, or equity securities issued by the Group for acquisition of control over the acquiree on the date of acquisition, and various directly related expenses incurred in merger of enterprises (the cost of merger of enterprises achieved in stages through multiple transactions is the sum of cost of each single transaction). If the merger cost is higher than the fair value of the identifiable net assets of the acquiree obtained from merger, the difference should be recognized as goodwill; if the merger cost is lower than the fair value of the identifiable net assets of the acquiree obtained from merger, a review should be first conducted on the fair value of the identifiable net assets and liabilities and contingent liabilities obtained from merger, non-cash assets in consideration or equity securities issued. If, after review, the merger cost is still lower than the fair value of the identifiable net assets of the acquiree obtained from merger, the difference should be stated as non-operating income in the period of merger.

6. Method for preparation of consolidated financial statements

The Group includes all the subsidiaries under control in the scope of consolidated financial statements.

If the accounting policy or the accounting period adopted by any subsidiary differs from that adopted by the Group in preparation of the consolidated financial statements, necessary adjustments should be made to the subsidiary’s financial statements according to the Group’s accounting policy or accounting period.

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All material internal transactions, balance of current accounts and unrealized profits in the consolidation scope should be offset in preparation of the consolidated statements. The part not attributable to the parent company in the owners’ equity of the subsidiary, current gains/losses, other consolidated revenue and the part attributable to minority interests in the total consolidated revenue should be respectively listed under “minority interests, minority losses and gains, other consolidated revenue attributable to minority shareholders and total consolidated revenue attributable to minority shareholders” in the consolidated financial statements.

For subsidiaries obtained from merger of enterprises under the same control, their operating results and cash flows should be included in the consolidated financial statements at the beginning of the period of merger. If any adjustment is made to relevant items in the financial statements of the previous year when the comparative consolidated financial statements are prepared, the reporting entity formed after merger should be deemed as having existed since the ultimate controller begins to exert control.

If the equity of the invested entity under the same control is obtained in stages through multiple transactions, so as to achieve merger of enterprises, in preparation of the consolidated statements, it should be deemed that adjustment has been made in the current state since the ultimate controller begins to exert control. In preparation of the comparative statements, the relevant assets and liabilities of the acquiree should be included in the comparative statements of the Group’s consolidated financial statements and the increased net assets resulting from merger should be used to adjust relevant items under owners’ equity in the comparative statements not earlier than the time when the Group and the acquiree fall under the control of the ultimate controller simultaneously. To avoid repeated calculation of the value of the acquiree’s net assets, the long-term equity investment held by the Group before merger is achieved and the changes in relevant recognized gains/losses, other consolidated revenue and other net assets during the period from the later of the date when the original equity is obtained and the date when the Group and the acquiree finally fall under the control of the same party to the date of acquisition should be used to write down the retained earnings at the beginning of the period and current gains/losses during the period of comparative statements, respectively.

For subsidiaries obtained from merger of enterprises not under the same control, their operating results and cash flows should be included in the consolidated financial statements from the date when the Group obtains the control. In preparation of the consolidated financial statements, the financial statements of the subsidiaries should be adjusted based on the fair value of the identifiable assets, liabilities and contingent liabilities recognized on the date of acquisition.

If the equity of the invested entity not under the same control is obtained in stages through multiple transactions, so as to achieve merger of enterprises, in preparation of the consolidated statements, the equity held in the acquiree before the date of acquisition should be restated at the fair value of the equity on the date of acquisition and the difference between the fair value and the book value thereof should be stated as current investment revenue. Other consolidated revenue stated by equity method relating to the equity held in the acquiree before the date of acquisition and changes in other owners’ equity excluding net gains/losses, other consolidated revenue and distributed profits should be stated as investment profit/loss in the period when the date of acquisition falls, which excludes other consolidated revenue resulting from the invested entity’s restatement of changes in net liabilities or net assets in the defined benefit plan.

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If the Group partially disposes of long-term equity investment in its subsidiary without losing its control, in the consolidated financial statements, the difference between the disposal price and the net asset shares continuously calculated as from the date of acquisition or date of merger and held in the subsidiary after disposal of long-term equity investment should be used to adjust capital premium or stock premium. If the capital reserve is insufficient for write-down, the retained earnings should be adjusted.

If the Group loses control over the invested entity for reasons such as disposal of partial equity investments, in preparation of the consolidated financial statements, the remaining equity should be restated as per its fair value on the date of loss of control. The difference obtained after the sum of the consideration obtained from disposal of equity and the fair value of the remaining equity is subtracted by the net asset share continuously calculated as per the original shareholding percentage as from the date of acquisition or date of merger and to be held in the original subsidiary should be stated as investment profit/loss in the current period of loss of control and be used to write down goodwill. Other consolidated revenue relating to the equity investment of the original subsidiary should be restated as current investment profit/loss at the time of loss of control.

Regarding the Group’s disposal of equity investment in its subsidiary in stages through multiple transactions until loss of control, if the transactions for disposal of equity investment in its subsidiary until loss of control are a package deal, the transactions should be taken as a transaction for disposal of subsidiary and loss of control during accounting. However, the difference between each disposal price before loss of control and net asset share held in the subsidiary after disposal of investment should be recognized as other consolidated revenue in the consolidated financial statements, and stated as current investment profit/loss at the time of loss of control.

7. Classification of joint venture arrangements and accounting for joint operation

The Group’s joint venture arrangements include joint operation and joint venture. Regarding joint operation projects, the Group should recognize the assets held and liabilities undertaken independently in the capacity of a party to the joint venture in joint operation, recognize the assets held and liabilities undertaken by share, and recognize relevant revenues and expenses independently or by share according to relevant agreements. For asset transaction in which purchase and sale relating to joint operation does not constitute a business, only the part attributable to other participants in the joint operation in the gains/losses resulting from the said transaction should be recognized.

8. Standards for determination of cash and cash equivalents

Cash set out in the cash flow statement of the Group refers to stock cash and deposits that can be used for payment at any time. Cash equivalent set out in the cash flow statement refers to investment that is held for not more than three months, highly mobile, easily convertible into given amount of cash and unlikely to change in value.

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APPENDIX II

1. Foreign currency business and translation of foreign currency statements

(1) Foreign currency transactions

Regarding foreign currency transactions of the Group, the amount in foreign currency should be translated into amount in recording currency as per the spot exchange rate on the transaction date. The monetary accounts in foreign currency on the balance sheet date are translated into RMB accounts as per the spot exchange rate on the balance sheet date, and the translation difference arising therefrom is directly stated as current gain/loss except that the exchange difference arising from the special foreign-currency borrowings for purchase and construction or production of assets eligible for capitalization are disposed of as per the principle of capitalization.

(2) Translation of foreign currency financial statements

The assets and liabilities in the foreign currency balance sheet should be translated as per the spot exchange rate on the balance sheet date. Owners’ equity items excluding “undistributed profit” should be translated as per the spot exchange rate at the time when the business occurs. The revenue and expense items in the income statement should be translated as per the spot exchange rate on the date when the transaction occurs. The translation difference of the foreign currency statements resulting from the abovementioned translation should be set out under other consolidated revenues. Foreign currency cash flow should be translated as per the spot exchange rate on the date when the cash flow occurs. The effect of exchange rate change on cash should be set out separately in the cash flow statement.

10. Financial instruments

When the Group is a party to a financial instrument contract, a financial asset or financial liability should be recognized.

(1) Financial assets

Classification, recognition basis and measurement method of financial assets

The Group, according to investment purpose and economic essence, classifies its financial assets as financial assets measured at fair value with changes stated as current gains/losses, held-to-maturity investments, receivables and available-for-sale financial assets.

Financial assets measured at fair value with changes stated as current gains/losses include tradable financial assets and financial assets specified at the time of initial recognition to be measured at fair value with changes stated as current gains/losses. The Group classifies the financial assets that meet one of the following conditions as tradable financial assets: the financial assets are acquired for sale in the near term; the financial assets are a part of the portfolio of identifiable financial instruments subject to centralized management and there is objective evidence showing that the Company has recently adopted short-term profit method for management of the said portfolio; the financial assets are derivative instruments, excluding the derivative instruments which are specified as and are derivative instruments of effective hedging instruments, derivative instruments under

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financial guarantee contracts, and derivative instruments related to the equity instrument investment which is not quoted in the active market and whose fair value cannot be measured reliably, and which should be settled by delivering the equity instrument. The Group specifies the financial instruments which only meet one of the following conditions as financial assets measured at fair value with changes stated as current gains/losses at the time of initial recognition: the specification can remove or obviously reduce inconsistency in recognition or measurement of relevant gains or losses resulting from different bases for measurement of the said financial instruments; the Company’s formal written documents concerning risk management or investment strategies have set out that the said financial instrument portfolio is managed and assessed based on fair value and is reported to key management personnel; the financial instruments are hybrid instruments including one or more embedded derivative instruments, unless the embedded derivative instruments have no material effect on the cash flow of the hybrid instruments, or the embedded derivative instruments obviously cannot be split from relevant hybrid instruments; the financial instruments are hybrid instruments including embedded derivative instruments that should be split but cannot be measured separately at the time when they are acquired or on the subsequent balance sheet date. Such financial assets should be measured subsequently at fair value. Change in fair value should be stated as gain/loss from change in fair value; interest or cash dividend obtained in the period when the assets are held should be recognized as investment revenue; in disposal, the difference between the fair value and the initially stated amount should be recognized as investment profit/loss, and the gain/loss from change in fair value should be adjusted.

Held-to-maturity investments refer to non-derivative financial assets which have a fixed maturity date and fixed or determinable recovery amount and in which the Group has the intent and capacity to hold to maturity. Held-to-maturity investments should be measured subsequently at amortized cost by the actual interest rate method, and all the gains/losses arising from amortization or depreciation and derecognition should be stated as current gains/losses.

Receivables refer to non-derivative financial assets without quotation in the active market but with fixed or determinable recovery amount, and should be measured subsequently at amortized cost by the actual interest rate method, and all the gains/losses arising from amortization or depreciation and derecognition should be stated as current gains/losses.

Available-for-sale financial assets refer to non-derivative financial assets specified at the time of initial recognition to be available for sale and financial assets not classified as other financial assets. In such assets, equity instrument investment which is not quoted in the active market and whose fair value cannot be measured reliably and the derivative financial assets which relate to the equity instrument and should be settled by delivering the equity instrument should be measured subsequently at cost; others which are quoted in the active market or which are not quoted in the active market but whose fair value can be measured reliably should be measured at fair value and the changes in fair value should be stated as other consolidated revenues. Such financial assets are measured subsequently at fair value. Except for impairment loss and exchange gain/loss resulting from foreign currency monetary financial assets, the change in fair value of available-for-sale financial assets should be directly stated as shareholders’ equity. When the financial assets are derecognized, the cumulative amount of changes in fair value originally and directly stated as equity should be restated as current gain/loss. Interest on available-for-sale debt instrument investments as calculated by the actual interest rate method in the period when they are held and the cash dividend relating to

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available-for-sale equity instrument investments and declared to be issued by the invested entity should be taken as investment revenues and stated as current gains/losses. Equity instrument investments which are not quoted in the active market and whose fair value cannot be measured reliably should be measured by cost.

Recognition basis and measurement method of transfer of financial assets

Recognition should be discontinued when a financial asset meets any of the following conditions: ①the contract right to collect the cash flow of the said financial asset terminates; ②the financial asset has been transferred and the Group has transferred almost all the risks and rewards relating to the ownership of the financial asset to the transferee; ③the financial asset has been transferred and the Group has given up control over the financial asset, though it neither transfers nor reserves almost all the risks and rewards relating to the ownership of the financial asset.

If the enterprise has neither transferred nor reserved almost all the risks and rewards relating to the ownership of a financial asset, and has not given up control over the financial asset, the relevant financial asset should be recognized according to the extent of its continuous involvement in the transferred financial asset, and the relevant liability should be recognized accordingly.

If the transfer of an entire financial asset satisfies the conditions for derecognition, the difference between the book value of the transferred financial asset and the sum of consideration received from the transfer and the cumulative amount of changes in the fair value originally stated as other consolidated revenues should be stated as current gain/loss.

If the transfer of a partial financial asset satisfies the conditions for derecognition, the entire book value of the transferred financial asset should, between the part which has been derecognized and the part which has not been derecognized, be amortized according to their respective relative fair values, and the difference between the sum of consideration received from the transfer and the cumulative amount of changes in the fair value that are originally stated as other consolidated revenues and should be amortized to the part which has been derecognized, and the aforesaid book value amortized should be stated as current gain/loss.

Test method and accounting of financial asset impairment

Except for financial assets measured at fair value with changes stated as current gains/losses, the Group checks the book value of other financial assets on the balance sheet date, and withdraws provision for impairment if there is objective evidence for impairment of a certain financial asset.

If any financial asset measured at amortized cost decreases in value, the difference by which the present value is lower than the book value of expected future cash flow (excluding future credit loss not incurred) should be withdrawn as provision for impairment. If there is any objective evidence that the said financial asset has restored to its original value and objectively relates to events happening after the said loss is recognized, the original recognized loss will be restated as current gain/loss.

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If any available-for-sale financial asset decreases in value, the cumulative loss arising from decreased fair value originally and directly stated as owners’ equity should be restated as impairment loss. For available-for-sale debt instrument investments whose impairment loss is recognized, if their fair value increases after the period and objectively relates to events happening after the original impairment loss is recognized, the original recognized impairment loss will be restated as current gain/loss. For available-for-sale equity instrument investments whose impairment loss is recognized, increase in their fair value after the period will be directly stated as owners’ equity.

(2) Financial liabilities

Classification, recognition basis and measurement method of financial liabilities

At the time of initial recognition, financial liabilities of the Group are classified into financial liabilities measured at fair value with changes stated as current gains/losses, and other financial liabilities.

Financial liabilities measured at fair value with changes stated as current gains/losses include tradable financial liabilities and financial liabilities specified at the time of initial recognition to be measured at fair value with changes stated as current gains/losses. Such financial liabilities are subsequently measured at fair value and the gain or loss arising from change in fair value and the dividend and interest expense relating to the said financial liabilities are stated as current gains/losses.

Other financial liabilities are measured subsequently at amortized cost by the actual interest rate method.

Conditions for derecognition of financial liabilities

If the current obligation of a financial liability is exempted in part or in whole, the said financial liability or obligation should be derecognized. If the Company signs an agreement with the obligee on substitution of the current financial liability by undertaking a new financial liability and the contract terms on the new financial liability and current financial liability are different substantially, the current financial liability should be derecognized and the new financial liability should be recognized at the same time. If the Group makes any substantial amendment to the contract terms on the current financial liability in part or in whole, the current financial liability or any part thereof should be derecognized, and the financial liability with related terms amended should be recognized as a new financial liability at the same time. The difference between the book value of the part derecognized and the consideration paid will be stated as current gain/loss.

Determination method of fair value of financial assets and financial liabilities

The Group measures the fair value of financial assets and financial liabilities at the price in the main market. If there is no main market, the Group measures the fair value of financial assets and financial liabilities at the price in the most favourable market, and adopts the estimation technique applicable at the material time and with sufficient available data and other information support.

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APPENDIX II

1. Receivables

2. (1) Receivables large in unit value and subject to separate withdrawal of provision for bad debts

Judgment basis or criteria for The Group recognizes a certain receivable which accounts for large unit value more than 10.00% of the total receivables as a receivable large in unit value

Method for separate The difference by which the present value is lower than the withdrawal of provision for book value of the future cash flow will be withdrawn as bad debts of receivables provision for bad debts large in unit value

• (2) Receivables for which provision for bad debts is withdrawn as per the portfolio of credit risk features

Name of portfolio Method for withdrawal of provision for bad debts Portfolio 1 Aging analysis method Portfolio 2 Other methods

Portfolios subject to withdrawal of provision for bad debts by aging analysis method:

• Applicable □ Not Applicable

	Withdrawal	Withdrawal
	percentage of	percentage of
Age	accounts receivable	other receivables
Less than 1 year (inclusive)	3.00%	3.00%
1-2 years	10.00%	10.00%
2-3 years	25.00%	25.00%
Over 3 years	50.00%	50.00%
Over 5 years	100.00%	100.00%

Portfolios subject to withdrawal of provision for bad debts by percentage of balance:

• Applicable � Not Applicable

Portfolios subject to withdrawal of provision for bad debts by other methods:

• Applicable □ Not Applicable

Withdrawal Withdrawal percentage of percentage of Name of portfolio accounts receivable other receivables

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APPENDIX II

• (3) Receivables not large in unit value but subject to separate withdrawal of provision for bad debts

• Reasons for separate Credit risk is special and calculation by general aging analysis withdrawal of provision for method cannot truly reflect its recoverability bad debts

• Method for withdrawal of The difference by which the present value is lower than the provision for bad debts book value of the future cash flow will be withdrawn as provision for bad debts

• Inventories

Whether the Company needs to comply with the disclosure requirements for special industries

Yes

Internet video industry

The Company needs to comply with the disclosure requirements set out in the Guidelines No.6 of the Shenzhen Stock Exchange on the Disclosure about Growth Enterprise Market — Internet Video Operation of Listed Companies :

Inventories refer to finished products or merchandise held by the Group for sale in the daily operations, or work in progress during production, or materials and supplies to be consumed in production or provision of labour service, including raw materials, consigned finished goods, merchandise inventory, low-value consumables, etc.

The Group’s inventories are measured at actual costs when acquired; actual costs of inventories used or delivered are determined through weighted averaging. Low-value consumables are amortized by lump sum.

The Group conducts stocktaking at least once a year based on perpetual inventory system. Inventory gain/loss is stated as gain/loss of the current year.

Inventories are measured on the balance sheet date by the lower of cost and net realizable value, and the difference by which the cost of the inventories is higher than their net realizable value will be withdrawn as provision for inventory depreciation and stated as current gain/loss.

Net realizable value of inventories should be determined based on the reliable evidence obtained and consideration of purpose for holding the inventories, influence of events happening after the balance sheet date, etc.

Provision for depreciation of inventory is withdrawn as per single inventory item; for inventories with a large amount and lower unit price, the provision for depreciation is withdrawn by inventory type.

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APPENDIX II

If the influence on writing down inventory value has disappeared on the balance sheet date, the amount written down should be recovered, and restated from the provision for depreciation of inventory withdrawn before and as current gain/loss.

13. Assets held for sale

14. Long-term equity investment

Long-term equity investment of the Group mainly includes investment in subsidiaries, investment in associated enterprises and investment in joint ventures.

The Group’s judgment basis for joint control is that all the participants or participant portfolios jointly control the arrangement and policies on the activities relating to the arrangement should be subject to unanimous approval by the participants jointly controlling the arrangement.

When the Group directly or through its subsidiaries indirectly holds more than 20% (inclusive) but lower than 50% voting rights of the invested entity, it should be generally deemed that the Group has material influence on the invested entity. If the Group holds less than 20% voting rights of the invested entity, whether the Group has material influence on the invested entity should be judged based on overall consideration of such facts and information as whether the Group has representatives in the invested entity’s board of directors or similar organ of authority, or participates in the financial and operational policy making process of the invested entity, or has material transaction with the invested entity, or sends management staff to the invested entity, or provides key technical data to the invested entity.

If the Group has control over the invested entity, the invested entity should be the Group’s subsidiary. For long-term equity investment obtained through merger of enterprises under the same control, the share of book value of the net assets obtained in the merged party in the ultimate controller’s consolidated statements should be taken as the initial investment cost of the long-term equity investment on the date of merger. If the book value of the merged party’s net assets on the date of merger is negative, the cost of long-term equity investment should be nil.

Regarding acquisition of equity of the invested entity under the same control made in stages through multiple transactions and finally resulting in merger of enterprises, if the transactions are a package deal, the Group will take various transactions as a transaction for acquisition of control during accounting. If the transactions are not a package deal, the share of book value of the net assets held in the merged party after merger in the ultimate controller’s consolidated financial statements should be taken as the initial investment cost of the long-term equity investment on the date of merger. The difference between the initial investment cost and the sum of the book value of long-term equity investment before merger is achieved and the book value of the newly paid consideration for shares further obtained on the date of merger should be used to adjust the capital reserve. If the capital reserve is insufficient for write-down, the retained earnings should be written down.

For long-term equity investment obtained from merger of enterprises not under the same control, the cost of merger should be taken as the initial investment cost.

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Regarding acquisition of equity of the invested entity not under the same control made in stages through multiple transactions and finally resulting in merger of enterprises, if the transactions are a package deal, the Group will take various transactions as a transaction for acquisition of control during accounting. If the transactions are not a package deal, the sum of the book value of the originally held equity investment and the new investment cost should be taken as the initial investment cost stated by cost method. If the equity held before the date of acquisition is stated by equity method, other relevant consolidated revenues originally stated by equity method will not be adjusted for the moment. In disposal of the investment, accounting should be carried out on the same basis as that for direct disposal of relevant assets or liabilities by the invested entity. If the equity held before the date of acquisition is stated by fair value in available-for-sale financial assets, the cumulative changes in the fair value originally stated as other consolidated revenues should be stated as current investment profits/losses on the date of merger.

Except for the long-term equity investment obtained through merger of enterprises as mentioned above, the cost of long-term equity investment obtained from cash payment should be the acquisition price actually paid; the cost of long-term equity investment obtained through issuance of equity securities should be the fair value of the equity securities issued; the cost of long-term equity investment made by investors should be the value specified in the investment contract or agreement.

The Group measures investment in subsidiaries by cost method and investment in joint ventures and associated enterprises by equity method.

For long-term equity investment subsequently measured by cost method, when additional investment is made, the book value of cost of the long-term equity investment should be increased as per the fair value of cost paid for additional investment and relevant transaction expenses incurred. The cash dividend or profit to be distributed as announced by the invested entity should be recognized as current investment revenue as per the amount to be enjoyed.

For long-term equity investment subsequently measured by equity method, the book value of the long-term equity investment should be adjusted according to the changes in owners’ equity of the invested entity. In particular, in recognition of the share of net gains/losses to be held in the invested entity, the Group should recognize the invested entity’s net profits after adjustment on the basis of the fair value of all identifiable assets of the invested entity at the time of acquisition of investment and the Group’s accounting policies and accounting period, and by offsetting the part attributable to the invested entity and calculated by shareholding percentage in the gains/losses from the internal transactions between the Group and the joint ventures and associated enterprises.

In disposal of long-term equity investment, the difference between the book value of the long-term equity investment and the consideration actually obtained should be stated as current investment revenue. If the long-term equity investment stated by equity method is stated as owners’ equity due to other changes in the owners’ equity of the invested entity other than net gain/loss, the part originally stated as owners’ equity should be restated as current investment profit/loss as per relevant percentage in disposal of the said investment.

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If the Group has lost joint control or material influence on the invested entity due to disposal of partial equity investment, the remaining equity after disposal should be restated as available-for-sale financial asset, and the difference between the fair value and the book value of the remaining equity on the date when the joint control or material influence is lost should be stated as current gain/loss. For other consolidated revenues recognized due to accounting with equity method in original equity investment, accounting should be carried out on the same basis as that for direct disposal of relevant assets or liabilities by the invested entity in discontinuation of accounting by equity method.

If the Group has lost control over the invested entity due to disposal of partial long-term equity investment and the remaining equity after disposal can enable the Group to exert joint control or material influence on the invested entity, accounting should be carried out by equity method, the difference between the book value of the equity disposed of and the disposal consideration should be stated as investment revenue, and the remaining equity should be adjusted by deeming it as having been stated by equity method since acquisition. If the remaining equity after disposal cannot enable the Group to exert joint control or material influence on the invested entity, accounting should be carried out as per relevant provisions on available-for-sale financial assets, the difference between the book value of the equity disposed of and the disposal consideration should be stated as investment revenue, and the difference between the fair value and book value of the remaining equity on the date of loss of control should be stated as current investment profit/loss.

If the transactions for disposal of equity in stages resulting in loss of control are not a package deal, the Group will account each transaction respectively. If the transactions are a package deal, various transactions will be taken as a transaction for disposal of subsidiaries resulting in loss of control in accounting. However, before loss of control, the difference between the disposal price of each transaction and the book value of long-term equity investment corresponding to the equity disposal should be recognized as other consolidated revenue and then restated as current gain/loss at the time of loss of control.

15. Investment real estate

Measurement mode of investment real estate

Not applicable

16. Fixed assets

(1) Recognition conditions

Fixed assets of the Group are tangible assets that simultaneously meet the following conditions, namely, they are held for the purpose of commodity production, labor provision, lease or operation; their service life exceeds one year; they have a high unit value. Fixed assets are recognized when their related economic interests are likely to flow into the Group and their costs can be measured reliably. Fixed assets of the Group include transport equipment, electronic equipment and others. The Group withdraws provision for depreciation of all fixed assets except for the fixed assets for which adequate

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provision has been withdrawn and which are still in use and the land which is valuated and stated separately. Provision for depreciation is withdrawn based on average service life. Classification, term of depreciation, estimated ratio of net residual value and depreciation rate of the Group’s fixed assets are as follows:

(2) Method of depreciation

							Annual
				Method of	Term of	Residual	depreciation
Category				depreciation	depreciation	value ratio	rate
Transport	equipment			Average service life	5	5.00	19.00
Electronic	equipment	and	others	Average service life	5	5.00	19.00

At the end of each year, the Group reviews the estimated service lives, estimated net residual values and depreciation methods of fixed assets. Any change will be regarded as change in accounting estimates.

• (3) Recognition basis and appraisal and depreciation methods of fixed assets under financing lease

Fixed assets under financing lease of the Group include electronic equipment and others. For fixed assets under financing lease, the lower of the fair value of the leased assets and the present value of the minimum lease payment should be taken as the entry value of the leased assets. The difference between the entry value of the leased assets and the minimum lease payment should be taken as unrecognized finance cost. The depreciation policy for self-owned fixed assets should be used for fixed assets under financing lease. If it can be appropriately determined that the ownership of a leased asset can be obtained upon expiration of the lease term, provision for depreciation of the leased fixed asset should be withdrawn in its estimated service life; otherwise, provision for depreciation of the leased fixed asset should be withdrawn in the shorter of the lease term and the estimated service life of the asset.

17. Construction in progress

Whether the Company needs to comply with the disclosure requirements for special industries

Yes

Internet video industry

The construction in progress is restated as fixed assets according to the value estimated by project budget, value or actual construction costs from the day when the construction is ready for its intended use, and depreciation is withdrawn from next month. The difference in the original value of fixed assets will be adjusted after completion accounting is made.

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18. Borrowing costs

For borrowing costs incurred that can be directly stated as fixed assets, investment real estate and inventories, of which the acquisition and construction or production activities take over one year to get ready for their intended use or for sale, they should be capitalized when 1) the asset disbursements have already incurred; 2) the borrowing costs has already incurred; and; 3) the acquisition and construction or production activities which are necessary to prepare the asset for its intended use or sale have already started; when the qualified asset under acquisition and construction or production is ready for the intended use or sale, the capitalization of the borrowing costs should be ceased, and borrowing cost incurred thereafter should be stated as current gains/losses. If the acquisition and construction or production of the assets eligible for capitalization are discontinued abnormally, and the discontinuation lasts for over three months, capitalization of the borrowing costs should be suspended until the acquisition and construction or production activities resume.

As for specially borrowed loans, the to-be-capitalized amount of interests should be determined in light of the actual cost incurred of the specially borrowed loan at the present period minus the income of interests earned on the unused borrowed loans as a deposit in the bank or as a temporary investment; as for general borrowing, the enterprise should calculate and determine the to-be-capitalized amount of interests on the general borrowing by multiplying the weighted average asset disbursement of the part of the accumulative asset disbursements minus the general borrowing by the capitalization rate of the general borrowing used. The capitalization rate should be calculated and determined in light of the weighted average interest rate of the general borrowing.

19. Biological assets

None

1. Oil and gas assets

None

1. Intangible assets

2. (1) Valuation method, service life and impairment test

Whether the Company needs to comply with the disclosure requirements for special industries

Yes

Internet video industry

The Company needs to comply with the disclosure requirements set out in the Guidelines No. 6 of the Shenzhen Stock Exchange on the Disclosure about Growth Enterprise Market — Internet Video Operation of Listed Companies :

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The Group’s intangible assets include movie and television copyrights, system software and non-patent technologies, which are measured at the actual cost at the time of acquisition. In particular, the consideration actually paid for purchasing intangible assets and other expenses are stated as the actual cost; the actual cost of intangible assets invested by investors should be determined according to the value agreed upon in the investment contract or agreement, but if the value agreed in the contract or agreement is unfair, the actual cost should be determined according to the fair value; for intangible assets, which are owned by the acquiree but not recognized in its financial statements, acquired through merger not under the same control, such intangible assets should be determined according to the fair value at the initial recognition of the acquiree’s assets.

The service life and amortization of intangible assets:

Estimation of service life of intangible assets with a limited service life

Items Estimated service life Movie and television copyrights Authorization period or 10 years System software Beneficial period stipulated in the contract or 10 years Non-patented technology Beneficial period stipulated in the contract or 10 years

The Company shall, at the end of each year, recheck the service life and amortization methods of intangible assets with limited service life. The recheck shows that the service life and amortization methods of intangible assets at the end of the period are not different from the previous estimates.

• (2) If it is unable to forecast the period when the intangible asset can bring economic benefits to the enterprise, it shall be regarded as an intangible asset with an uncertain service life. The Company shall, at the end of each year, recheck the service life of intangible assets with an uncertain service life. If they are still uncertain after the recheck, the Company shall carry out the impairment test at the balance sheet date.

• (3) Amortization of intangible assets

For intangible assets with limited service life, the Company shall determine their service life at the time of acquisition and shall systematically and reasonably amortize them by the straight-line method in their service life. The amortization amount shall be stated as current gain/loss according to the benefit items. The specific amortization amount shall be the cost minus the expected residual value. For intangible assets with an impairment provision, the accumulative amount of impairment provision shall be deducted from the cost as well and its residual value shall be regarded as zero. Unless it is under the following circumstances: (1) A third party promises to purchase the intangible assets at the end of its service life and (2) the information about the expected residual value can be obtained from the active market, and the market is most likely to remain when the service life of the intangible asset ends.

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Intangible assets with an uncertain service life may not be amortized. The Company shall, at the end of each year, recheck the service life of intangible assets with an uncertain service life. Where there are evidences to prove the intangible assets have limited service life, it shall be estimated of its service life and be amortized systematically and reasonably within the estimated service life.

(2) Accounting policy for R&D expenditures

The Group classifies the R&D expenditures as research expenditure and development expenditure according to its nature and whether the intangible assets finally formed in the R&D activities is highly uncertain. The expenditures during the research phase are used for materials and relevant preparations for further development activities and are stated as current gain/loss when incurred; the expenditures during the development stage are used for development activities carried out after the work in the research phase is completed; the expenditures during the development phase are recognized as intangible assets when the entity can meet all of the following conditions:

1. The technical feasibility of completing the intangible asset so that it will be available for use or sale;

2. Its intention to complete the intangible asset and use or sell it;

3. The existence of a market for the output of the intangible asset or the intangible asset itself;

4. The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset;

5. Its ability to measure reliably the expenditure attributable to the intangible asset during its development.

Expenditures not meeting the aforesaid conditions should be stated as current gains/losses when incurred. Development expenditures that have been stated as gains/losses should no longer recognized as assets later. Capitalized expenditures during the development phase are stated as development expenditures on the balance sheet or presented as intangible assets from the date when the project is ready for the intended use.

22. Impairment of long-term assets

The Group will conduct impairment test if there are signs that impairment of long-term assets such as long-term equity investments, fixed assets, construction in progress and intangible assets with limited service life may occur on the balance sheet date. Impairment test is conducted by the end of every year on goodwill and intangible assets with indefinite service life regardless whether there is any sign of impairment.

After the impairment test, if the book value of the asset exceeds its recoverable amount, the difference should be recognized as impairment loss. Once the impairment loss of the aforesaid asset is confirmed, it will not be reversed in the subsequent accounting period.

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23. Long-term expenses to be amortized

The Group’s long-term expenses to be amortized include renovation fees and so on, which are evenly amortized in the benefit period. If long-term expenses to be amortized are not beneficial to subsequent accounting periods, the remaining value of the items after amortization should be stated as current gains/losses.

24. Employee remuneration

(1) Accounting for short-term remuneration

Short-term compensation mainly includes salaries, bonuses, subsidies and welfares. During the accounting period when the employees serve the Group, the short-term compensation actually incurred should be recognized as liability and stated as current gain/loss or relevant asset cost based on the beneficiary.

(2) Accounting for post-employment benefits

After-employment benefits mainly include basic endowment insurance, unemployment insurance, etc., which are classified as defined contribution plans according to the risks and obligations undertaken by the company. For the defined contribution plans, the contribution paid to individual employee for its services during the accounting period on the balance sheet date should be recognized as liability and stated as current gain/loss or relevant asset cost based on the beneficiary.

(3) Accounting for post-employment benefits

(4) Accounting for other long-term employee benefits

Other long-term employee benefits are all employee remuneration other than short-term remuneration, post-employment benefits and termination benefits, including long-term compensated absences, long-term disability benefits, long-term profit sharing plan, etc.

25. Accrued liability

If the businesses relating to contingencies, e.g. external guarantees, commercial acceptance bill discount, pending litigation or arbitration and product quality assurance, meet all the following conditions, the Group recognizes them as accrued liabilities: (1) the obligations are currently undertaken by the Group; (2) fulfillment of the said obligations is likely to lead to outflow of the economic interest of the enterprise; and (3) the amount of the said obligations can be measured reliably.

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26. Share-based payment

The equity-settled share-based payment in return for employee services should be measured at the fair value of the equity instruments granted to the employees on the date of the grant. If the right cannot be exercised until the vesting period comes to an end or until the prescribed performance conditions are met, then within the vesting period, the said fair value amount should, based on the best estimate of the number of vested equity instruments, be included in the relevant cost or expense by the straight line method and the capital reserves should be increased accordingly.

• (1) Method of determining the fair value of equity instruments

• 1) For equities granted to employees, their fair value is measured as per the market value of the Group’s shares, and adjusted according to the terms and conditions (excluding the vesting conditions outside market conditions) based on which the shares are granted.

• 2) For stock options granted to employees, it is difficult to obtain their market prices in many cases. If there is no trade option with similar terms and conditions, the Group applies the appropriate option pricing model to estimate the fair value of the granted options.

• (2) Basis for determining optimal estimate of vested equity instruments

On each balance sheet date within the vesting period, the Group makes the best estimate according to the latest changes to the number of vested employees and other follow-up information, and amend the estimate of the number of vested equity instruments. On the vesting date, the final estimate of the number of vested equity instruments should be equal to the number of the actually vested equity instruments.

(3) Accounting for implementation of share-based payment plans

• 1) As to a cash-settled share-based payment, if the right may be exercised immediately after the grant, the fair value of the liability undertaken by the Group should, on the date of the grant, be included in the relevant costs or expenses, and the liabilities should be increased accordingly. On each balance sheet date and each account date prior to the settlement, the fair value of the liability should be re-measured and the changes thereof should be included in the current profits/losses.

• 2) As to a cash-settled share-based payment, if the right may not be exercised until the vesting period comes to an end or until the specified performance conditions are met, on each balance sheet date within the vesting period, the services obtained in the current period should, based on the best estimate of the information about the exercisable right, be included in the relevant costs or expenses and the corresponding liabilities at the fair value of the liability undertaken by the Group.

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• 3) As to an equity-settled share-based payment in return for services of employees, if the right may be exercised immediately after the grant, the fair value of the equity instruments should, on the date of the grant, be included in the relevant cost or expense and the capital reserves should be increased accordingly.

• 4) As to a equity-settled share-based payment in return for employee services, if the right cannot be exercised until the vesting period comes to an end or until the prescribed performance conditions are met, then on each balance sheet date within the vesting period, the services obtained in the current period should, based on the best estimate of the number of vested equity instruments, be included in the relevant costs or expenses and the capital reserves at the fair value of the equities instruments on the date of the grant.

(4) Accounting for modifications of share-based payment plan

When modifying the share-based payment plan, if the modification leads to an increase in the fair value of equity instruments granted, the Group should recognize the increase of the services obtained according to the increase in the fair value of equity instruments. If the modification leads to an increase in the number of equity instruments granted, the Group should recognize the increase in the fair value of equity instruments as increase of the services obtained. The increase in the fair value of equity instruments refers to the difference in the fair value of equity instruments before and after the modification on the date of modification. If the modification reduces the total fair value of share-based payment or adopts a mode unfavourable to the employees in respect of changes in the terms and conditions of share-based payment plan, the Group should nevertheless continue to account for the services obtained as if that modification had never occurred, unless the Group has cancelled some or all equity instruments granted.

(5) Accounting for termination of share-based payment plan

If a grant of equity instruments is cancelled or settled during the vesting period (other than a grant cancelled by forfeiture when the vesting conditions are not satisfied), the Group should:

• 1) Account for the cancellation or settlement as an acceleration of vesting, and should therefore recognize immediately the amount that otherwise would have been recognized for services received over the remainder of the vesting period;

• 2) Account for any payment made to the employee on the cancellation or settlement as the repurchase of an equity interest, and should the payment exceeds the fair value of the equity instruments granted at the repurchase date, include such excess as current expense.

• Other financial instruments including preferred stocks and perpetual bonds

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APPENDIX II

28. Revenues

Whether the Company needs to comply with the disclosure requirements for special industries

Yes

Internet video industry

The Group’s operating revenue mainly includes advertising revenue, terminal revenue, membership revenue, revenue from distribution of films and TV plays, interest revenue, fee and commission revenue. Revenue recognition principles are as follows:

Revenues from sales of commodities should be recognized when the following conditions are simultaneously satisfied: (1) the major risks and rewards concerning the ownership of the commodities are transferred to the buyers; (2) the Group no longer reserves the continuous management right generally related to ownership, or implements effective control over the commodities sold; (3) the amount of revenue can be measured reliably; (4) relevant economic benefits are likely to flow in; (5) relevant costs incurred or to be incurred can be measured reliably.

The service revenue can be recognized when the total revenue and total cost of labor services can be measured reliably, the economic benefits related to labor services are likely to flow into the Group and the progress of the labor service can be reliably determined. At the balance sheet date, the results of the labor service transaction can be reliably estimated, relevant service revenue is recognized according to the percentage of completion, and the percentage of completion is determined by the proportion of the service provided to the service that should be provided. Where the labor service transaction result cannot be estimated reliably, and if the service cost incurred is expected to be compensated, the service revenue will be recognized according to the amount of labor cost that can be compensated, and the service cost incurred should be carried forward. If the results of the labor service transaction cannot be estimated reliably and it is expected that the service cost incurred cannot be fully compensated, the labor costs incurred should be stated as current gains/losses, and the revenue from providing labor services would not be recognized.

Revenue from transfer of right to use assets should be recognized when relevant economic benefits are likely to flow in and the amount of revenue can be measured reliably.

Specific revenue recognition principles of the Group:

(1) Advertising business

Basis for recognition: the revenue is recognized according to the advertising fees and publishing progress as agreed in the sales contract signed with the advertising agencies or advertisers.

(2) Terminal business

Basis for recognition: the sales revenue each month is recognized according to the actual sales of intelligent terminal products and unit sales price in that month.

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APPENDIX II

• (3) Membership and distribution businesses

• 1) Revenue of network paid services

Basis for recognition: a. the service revenue each month is recognized according to the actual service price in that month; b. the revenue shall be deferred annually if the actual sales service exceeds one year.

• 2) Revenue from distribution of online video copyright

Basis for recognition: the revenue is recognized after giving authorization to the other party and receiving the authorization fee or obtaining the right to receive the authorization fee according to the copyright distribution contract.

• 3) Revenue from distribution of films and TV plays

• ① First transfer of broadcasting right

Basis for recognition: the revenue is recognized when the TV copies, videotapes and other carriers are transferred to the buyer for the first time after the shooting is completed and the TV Play Production License is obtained upon approval of the film and television administrative departments, and relevant economic benefits are likely to flow in the Group.

• ② Multiple transfers of broadcasting right

Basis for recognition: the revenue is recognized at one time in the year when the broadcasting right started as specified in the contract.

• ③ Other ways

Basis for recognition: for proceeds obtained through presale of distribution right of the film and other rights by means of outright sale in whole or in part before shooting is completed or the promise of giving the premiere (broadcasting) right, the sales revenue is recognized when the shooting is completed and the TV play is provided to the customer for use according to the contract.

4) Interest revenue

The Group adopts the actual interest rate method to recognize the interest revenues of all interest-bearing financial assets and financial liabilities other than tradable financial assets and financial liabilities.

The actual interest rate method is a method of calculating the amortized cost and interest revenue for each period in accordance with the actual interest rate of a financial asset or financial liability (including a group of financial assets or financial liabilities). The actual interest rate is the rate that exactly discounts the future cash flow of the financial asset and financial liability through the

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expected life or, when appropriate, a shorter period, to the current book value of the said financial asset and financial liability. If the interest of the loan is calculated on a monthly basis and the principal and the interest are expected to be recovered normally, the contract rate may be regarded as the actual interest rate.

When calculating the actual interest rate, the Company shall estimate future cash flows (irrespective of future credit losses) considering all contractual terms of the financial assets and financial liabilities. The calculation includes all fees paid or received between parties to the financial assets and financial liabilities contract that are an integral part of the actual interest rate, transaction costs, and premiums or discounts. When it is not possible to estimate reliably the future cash flows or the expected life of the financial asset or financial liability, the Company shall use the contractual cash flows over the full contractual term of the said financial asset or financial liability.

(5) Fee and commission revenue and expenditure

For the fee and commission received and paid by the Group for providing and accepting relevant services at a particular point in time or for a period of time, the relevant expenses and revenues shall be recognized according to the accrual basis.

For the fee and commission received and paid by the Group for granting of loans, the relevant expenses and revenues shall be recognized upon completion of actual terms agreed upon by the parties to the transaction.

(6) Other businesses

Basis for recognition: the revenue is recognized when relevant conditions are satisfied.

29. Government subsidy

(1) Judgment basis and accounting for assets-related government subsidies

The Group’s government subsidies include special subsidies, project subsidies and so on.

If the government subsidy is a monetary asset, it should be measured in light of the amount actually received. For the subsidy appropriated in accordance with the fixed quota standard or there is conclusive evidence at the end of the year that the enterprise can meet relevant requirements of financial support policies and is expected to receive financial support funds, the subsidy should be measured in light of the receivable amount. If a government subsidy is a non-monetary asset, it should be measured at its fair value. If its fair value cannot be obtained in a reliable way, it should be measured at its nominal amount (RMB1).

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Standards for recognition of asset-related government subsidies: Subsidies acquired by the Group from the government for the acquisition, construction or otherwise formation of long-term assets are recognized as asset-related government subsidies. The assets-related government subsidies are recognized as deferred earnings, evenly allocated in the service life of relevant assets, and stated as current gains/losses.

(2) Judgment basis and accounting for income-related government subsidies

Standards for recognition of income-related government subsidies: The Group recognizes the non-asset related subsidies it receives from the government as income-related government subsidies, e.g. various rewards, quota subsidies, financial discounts, allocated R&D expenses (excluding purchase and construction of fixed assets). The income-related government subsidies should be recognized as deferred earnings if they are used for making up relevant expenses or losses in the subsequent period and should be stated as current gains/losses during the period when relevant expenses are recognized. The income-related government subsidies used for making up relevant expenses or losses incurred should be directly stated as current gains/losses.

30. Deferred tax assets/deferred tax liabilities

The deferred tax assets and deferred tax liabilities of the Group should be calculated and recognized as per the difference between the tax basis and book values of the assets and liabilities. A deferred tax asset should be recognized for the deductible losses of deduction of taxable incomes that can be carried forward to subsequent years according to tax laws. A deferred tax liability should not be recognized for temporary differences arising from the initial recognition of goodwill. Deferred tax assets and deferred tax liabilities should not be recognized for temporary differences in the initial recognition of assets or liabilities arising from non-business merger transactions which have no effect on the accounting profits and taxable incomes (or deductible losses). The deferred tax assets and deferred tax liabilities on the balance sheet date should be measured at the applicable tax rate for the period in which the said assets are expected to be recovered or the said liabilities are expected to be settled.

The Group recognizes deferred tax assets to the extent that the amount of future taxable income to be offset by the deductable temporary differences, deductible loss or tax deduction is likely to be obtained.

31. Leasing

(1) Accounting for operating lease

If the Group is a lessee, the rent should be stated as relevant asset cost or current gain/loss on a straight-line basis in various periods of the lease term.

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APPENDIX II

• (2) Accounting for finance lease

The Group’s leasing business includes finance lease and operating lease.

If the Group is a lessee, on the lease commencement date, the book value of fixed assets of finance lease should be the lower of the fair value of the leased assets and the present value of minimum lease payments on the lease commencement date; the minimum lease payments should be stated as the book value of long-term payables; the differences between the two should be recognized as unrecognized finance costs. The initial direct cost incurred should be stated as the value of the leased assets. When making depreciation for financial lease assets, the Group should adopt the depreciation policy consistent with that for its own depreciable assets, and the depreciation period should be subject to the lease contract. If it can be appropriately determined that the ownership of a leased asset can be obtained by the Group upon expiration of the lease term, the life of the leased asset from the lease commencement date should be regarded as the depreciation period; otherwise the lease term or the life of the leased asset, whichever is shorter, should be regarded as the depreciation period.

1. Other important accounting policies and accounting estimates

2. Changes in important accounting policies and accounting estimates

3. (1) Changes in important accounting policies

4. Applicable □ Not Applicable

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APPENDIX II

Changes in accounting policies Procedure for examination and relevant reasons and approval

Notes

According to the Notice of the The ending credit balances of For transactions occurring on Ministry of Finance on items like “VAT payable”, May 1st, 2016 and during the Printing and Issuing “unpaid VAT”, “input VAT to be implementation of the Provisions Concerning the credited “, “input VAT to be Provisions, if the amount Accounting Treatments on verified”, “VAT retained” under recorded for assets, liabilities Value-Added Tax (Cai Luai the subject of “taxes payable” and gains/losses in the financial [2016] No. 22) on December shall be listed in the “other statements is affected due to the 3rd, 2016, as well as the current assets” or “other Provisions, relevant adjustment interpretation of the relevant non-current assets” in the shall be made according to the issues concerning the balance sheet as the case may Provisions; for transactions Provisions Concerning the be; the ending credit balances occurring between January 1st, Accounting Treatments on of subjects including “taxes 2016 and April 30th, 2016, no Value-Added Tax , after the payable - output VAT to be retroactive adjustment shall be comprehensive pilot practice transferred” shall be listed in made; no retroactive adjustment of levying value-added tax in “other current assets” or “other shall be made for financial lieu of business tax, the item non-current assets” in the statements during the of “business taxes and balance sheet as the case may comparable period in 2016 surcharges” is renamed as” be; the ending credit balances financial statements. taxes and surcharges” of “unpaid VAT”, “VAT accordingly, which is used to calculated on a simplified calculate the consumption method”, “VAT payable for tax, municipal maintenance transfer of financial products”, and construction tax, resource “VAT withheld and remitted” tax, education surcharge and and other items under the property tax, land use tax, subject of “taxes payable” shall vehicle and vessel use tax, be listed in the “taxes payable” stamp duty and other related in the balance sheet. taxes occurred during business activities of the company; the item of “business taxes and surcharges” in the income statement is renamed as “taxes and surcharges” accordingly.

According to the provisions of the Notice of the Ministry of Finance on Printing and Issuing Provisions Concerning the Accounting Treatments on Value-Added Tax (Cai Luai [2016] No. 22) on December 3rd, 2016, as well as the interpretation of the relevant issues concerning the Provisions Concerning the Accounting Treatments on Value-Added Tax , after the comprehensive pilot practice of levying value-added tax in lieu of business tax, the item of “business taxes and surcharges” is renamed as “taxes and surcharges” accordingly, which is used to calculate the consumption tax, municipal

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FINANCIAL INFORMATION OF LESHI INTERNET

maintenance and construction tax, resource tax, education surcharge and property tax, land use tax, vehicle and vessel use tax, stamp duty and other related taxes occurred during business activities of the company; the item of “business taxes and surcharges” in the income statement is renamed as “taxes and surcharges” accordingly.

The ending credit balances of items like “VAT payable”, “unpaid VAT”, “input VAT to be credited “, “input VAT to be verified”, “VAT retained” under the subject of “taxes payable” shall be listed in the “other current assets” or “other non-current assets” in the balance sheet as the case may be; the ending credit balances of subjects including “taxes payable - output VAT to be transferred” shall be listed in “other current assets” or “other non-current assets” in the balance sheet as the case may be; the ending credit balances of “unpaid VAT”, “VAT calculated on a simplified method”, “VAT payable for transfer of financial products”, “VAT withheld and remitted” and other items under the subject of “taxes payable” shall be listed in the “taxes payable” in the balance sheet.

For transactions occurring on May 1st, 2016 and during the implementation of the Provisions, if the amount recorded for assets, liabilities and gains/losses in the financial statements is affected due to the Provisions, relevant adjustment shall be made according to the Provisions; for transactions occurring between January 1st, 2016 and April 30th, 2016, no retroactive adjustment shall be made; no retroactive adjustment shall be made for financial statements during the comparable period in 2016 financial statements.

(2) Changes in important accounting estimates

□ Applicable � Not Applicable

1. Others

VI. Taxes

1. Main taxes and tax rates

Taxes Tax basis

Tax rates

VAT	Sales revenue of	17% or 6% Note 1
	inventories, raw materials
	and taxable services
Municipal maintenance and	Turnover tax payable	7% or 5%
construction tax
Enterprise income tax	Taxable income	15%, 16.5%, 25% Note 2
Business tax	Taxable items	5%
Education surcharge	Turnover tax payable	3%
Local education surcharge	Turnover tax payable	2%
Construction fee for	Revenue from advertising	3%
cultural undertakings	on video platforms

— 344 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Information about taxpayers entitled to different corporate income tax rates

Name of taxpayer

Name of taxpayer	Income tax rate
Leshi Internet Information & Technology Corp (Beijing)	15%
Letv Information Technology (Tibet) Co., Ltd.	15%
Letv Information Technology (Hong Kong) Co., Ltd.	16.50%
Khorgos Letv New Generation Culture Media Co., Ltd.	Exempt for 5 years from the
	year in which the first revenue
	is obtained
Dongyang LeTV Flower Film & TV Co., Ltd.	15%
Other taxpayers than the abovementioned ones	25%

2. Tax preference

The Company was certificated as a high-and-new technology enterprise in 2008. In 2014, the Company applied for the review of high-and-new technology enterprise qualification, and obtained the Certificate for High-and-New Technology Enterprise (No. GR201411001113) after being approved jointly by Beijing Municipal Science & Technology Commission, Beijing Municipal Finance Bureau, Beijing State Taxation Bureau and Beijing Local Taxation Bureau. The validity period of the certificate is 3 years. According to the provisions of the Enterprise Income Tax Law and relevant laws, the Company can enjoy a preferential enterprise income tax rate of 15% for national high-and-new technology enterprises during the validity period.

According to Document Zang Zheng Fa [2014] No. 51 of the People’s Government of Tibet Autonomous Region and the Notice of the People’s Government of Tibet Autonomous Region on Printing and Distributing the Measures for the Implementation of Enterprise Income Tax Policies of Tibet Autonomous Region, Letv Information Technology (Tibet) Co., Ltd. can enjoy a preferential enterprise income tax rate of 15% for enterprises in Tibet Autonomous Region for the implementation of the western development strategy. Besides, from January 1st, 2015 to December 31st, 2017, as for the income tax paid by enterprises according to the aforesaid policy, local portion (40%) of the enterprise income tax to be paid by enterprises in Tibet Autonomous Region is exempted temporarily.

Khorgos Letv New Generation Culture Media Co., Ltd., which is an enterprise falling within the scope in the Catalogue of Enterprise Income Tax Incentives for Industries Particularly Encouraged by Poverty Areas of Xinjiang for Development upon filing with the State Administration of Taxation of Horgos Economic Development Zone, the Xinjiang Uygur Autonomous Region on September 18th, 2015, should be exempted from the entire enterprise income tax on the income for five year, starting from the first year in which manufacturing or business operational revenue is earned.

Dongyang LeTV Flower Film & TV Co., Ltd. was certificated as a high-and-new technology enterprise in 2016 and obtained the Certificate for High-and-New Technology Enterprise (No. GR201633001797) on November 21st, 2016 after being approved jointly by Science Technology Department of Zhejiang Province, Zhejiang Provincial Department of Finance, Zhejiang Provincial

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FINANCIAL INFORMATION OF LESHI INTERNET

Office, SAT and Zhejiang Local Taxation Bureau. The validity period of the certificate is 3 years. According to the provisions of the Enterprise Income Tax Law and relevant laws, the Company can enjoy a preferential enterprise income tax rate of 15% for national high-and-new technology enterprises during the validity period.

Khorgos Jinbei Film & TV Co., Ltd., which is a subsidiary of Dongyang LeTV Flower Film & TV Co., Ltd. falling within the scope in the Catalogue of Enterprise Income Tax Incentives for Industries Particularly Encouraged by Poverty Areas of Xinjiang for Development upon filing with the State Administration of Taxation of Horgos Economic Development Zone, the Xinjiang Uygur Autonomous Region on September 8th, 2016, should be exempted from the entire enterprise income tax on the income for five year, starting from the first year in which manufacturing or business operational revenue is earned.

3. Others

• Note 1: Among the VAT taxable revenues, the applicable tax rate of sales revenue of inventories and raw materials is 17%, and the applicable tax rate of revenue from advertising on video platforms, revenue from distribution of copyright of network videos, film & TV distribution revenue, telecommunications revenue, interest revenue and fee and commission revenue is 6%.

VII. Notes to items in the consolidated financial statement

1. Monetary fund

Unit: RMB

Items	Ending balance	Opening balance
Cash on hand	424,576.15	189,596.70
Bank deposit	1,482,118,516.72	2,714,588,518.44
Other monetary funds	2,186,603,263.21	15,000,000.00
Total	3,669,146,356.08	2,729,778,115.14
Including: Total of deposits with
overseas bank	18,650,622.15	15,754,751.22

Other descriptions

• Note 1: Frozen part of the bank balance at the end of the year was RMB24,307,102.45; the limited funds among other monetary funds was RMB2,184,265,202.02. In particular, the deposit for bank acceptance bill was RMB55,565,202.02, the L/G deposit was RMB1,200,000.00 and the deposit for purchase of TCL’s equity was RMB2,127,500,000.00.

• Note 2: Monetary funds at the end of the year do not have items with restrictions on use due to mortgage or pledge of account, and items with potential recovery risks.

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Financial assets measured at fair value with changes stated as current gains/losses

None

1. Derivative financial assets

□ Applicable � Not Applicable

1. Notes receivable

2. (1) Presentation of notes receivable by category

Unit: RMB

Items	Ending balance	Opening balance
Bank acceptance bill	5,884,729.45	435,380,941.24
Commercial acceptance bill	0.00	473,750,000.00
Total	5,884,729.45	909,130,941.24

• (2) Notes receivable of the Company at the end of the period

None

• (3) Notes receivable endorsed or discounted by the Company at the end of the period and not mature by the balance sheet date

		Unit: RMB
	Amount derecognized at the	Amount not derecognized at
Items	end of the period	the end of the period
Bank acceptance bill	893,699,070.37	0.00
Commercial acceptance bill	0.00	0.00
Total	893,699,070.37	0.00

• (4) Notes transferred to accounts receivable by the Company at the end of the period due to the drawer’s non-compliance

None

— 347 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Accounts receivable

2. (1) Disclosure of accounts receivable by category

Unit: RMB Ending balance Opening balance Book balance Provision for bad debts Book balance Provision for bad debts Category Withdrawal Withdrawal Amount Percentage Amount percentage Book value Amount Percentage Amount percentage Book value Accounts receivable whose amount is significant individually and for which provision for bad debts is withdrawn individually 9,167,884,709.47 100.00% 482,029,561.83 5.26% 8,685,855,147.64 3,559,108,861.12 100.00% 199,425,790.78 5.60% 3,359,683,070.34 Accounts receivable whose amount is significant individually and for which provision for bad debts is withdrawn individually 0.00 0.00% 0.00 0.00% 0.00 0.00 0.00% 0.00 0.00% 0.00 Total 9,167,884,709.47 100.00% 482,029,561.83 8,685,855,147.64 3,559,108,861.12 100.00% 199,425,790.78 3,359,683,070.34

Accounts receivable whose amount is significant individually and for which provision for bad debts is withdrawn individually by the end of the period:

□ Applicable � Not Applicable

Accounts receivable for which provision for bad debts is withdrawn as per aging analysis method in portfolio:

• Applicable □ Not Applicable

Unit: RMB

Age Ending balance Accounts receivable Provision for bad debts Withdrawal percentage

Within 1 year (sub item) Within 1 year (subtotal) 1-2 years 2-3 years 3-4 years 4-5 years Over 5 years Total	7,674,784,304.38 1,039,193,716.55 316,346,732.90 112,467,989.84 25,091,965.80 0.00 9,167,884,709.47	230,243,529.13 3.00% 103,919,371.66 10.00% 79,086,683.22 25.00% 56,233,994.92 50.00% 12,545,982.90 50.00% 0.00 100.00% 482,029,561.83

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Basis for determining the portfolio:

Accounts receivable for which provision for bad debts is withdrawn as per balance percentage method in portfolio:

□ Applicable � Not Applicable

Accounts receivable for which provision for bad debts is withdrawn as per other methods in portfolio:

• (2) Provision for bad debts withdrawn, recovered or reversed in the current period

In the current period, the provision for bad debts withdrawn amounted to RMB282,603,771.05, and the provision for bad debts recovered or reversed was RMB0.00.

Important provision for bad debts recovered or reversed in the current period:

Unit: RMB

Name of entity

Amount recovered or reversed

Recovery mode

• (3) The accounts receivable actually written off in the current period

Unit: RMB

Items

Amount written off

Accounts receivable actually written off

256,000.00

• (4) Top five balances of accounts receivable by debtor at the end of the period

Whether the Company needs to comply with the disclosure requirements for special industries

Yes

Internet video industry

This year, the t op five balances of accounts receivable by debtor at the end of the year totalled RMB2,903,209,661.92, accounting for 31.67% of the total balance of accounts receivable at the end of the year, and the balance of corresponding provision for bad debts withdrawn at the end of the year was RMB88,443,859.58.

• (5) Recognition of accounts receivable terminated due to transfer of financial assets

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (6) Assets and liabilities formed by transfer of accounts receivable and continuous involvement

None

1. Advance payments

2. (1) Presentation of advance payments by age

Unit: RMB

	**Ending **	balance	**Opening **	balance
Age	Amount	Percentage	Amount	Percentage
Within 1 year	576,082,314.10	93.01%	399,302,316.42	77.06%
1-2 years	18,871,311.21	3.05%	115,687,497.40	22.33%
2-3 years	24,008,650.23	3.88%	525,000.00	0.10%
Over 3 years	369,000.00	0.06%	2,664,996.07	0.51%
Total	619,331,275.54	—	518,179,809.89	—

Description of reasons for failure to timely settle important advance payments with an age of over 1 year:

(2) Top five balances of advance payments by prepaid item at the end of the period

This year, the top five balances of advance payments classified by the debtor at the end of the year totalled RMB458,315,724.42, accounting for 74.00% of the total balance of advance payments at the end of the year.

Other descriptions:

1. Interests receivable

2. (1) Classification of interests receivable

Unit: RMB

Items		Ending balance	Opening balance
Loan	interest	18,110,043.99	0.00
Total		18,110,043.99

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (2) Important overdue interest

None

1. Dividends receivable

2. (1) Dividends receivable

None

• (2) Important dividends receivable with an age of over one year

None

1. Other receivables

2. (1) Disclosure of other receivables by category

Unit: RMB

Category				Ending balance	Ending balance						Opening balance	Opening balance
	Book balance			Provision for bad debts			Book value	Book balance			**Provision for bad **		debts	Book value
					Withdrawal							Withdrawal
	**Amount **	Percentage		Amount	percentage			**Amount **	Percentage		Amount	percentage
Other receivables for which the
provision for bad debts is
withdrawn by combination of
credit risk features	715,368,784.41	99.17%		19,352,657.12		2.71%	696,016,127.29	170,611,638.59	99.99%		4,991,259.66		2.93%	165,620,378.93
Other receivable whose amount
is significant individually and
for which provision for bad
debts is withdrawn
individually	6,000,000.00		0.83%	6,000,000.00		100.00%	0.00	19,500.00		0.01%	19,500.00	100.00%		0.00
Total	721,368,784.41	100.00%		25,352,657.12		100.00%	696,016,127.29	170,631,138.59	100.00%		5,010,759.66			165,620,378.93

Other receivable whose amount is significant individually and for which provision for bad debts is withdrawn individually by the end of the period:

• Applicable � Not Applicable

Other receivables for which provision for bad debts is withdrawn as per aging analysis method in portfolio:

• Applicable □ Not Applicable

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Unit: RMB

		Ending balance
Age	Other receivables	Provision for bad debts	Withdrawal percentage
Within 1 year
(sub item)
Within 1 year
(subtotal)	563,997,902.94	16,919,937.13	3.00%
1-2 years	15,112,069.14	1,511,206.91	10.00%
2-3 years	2,428,460.77	607,115.19	25.00%
3-4 years	628,795.78	314,397.89	50.00%
4-5 years	0.00	0.00	50.00%
Over 5 years	0.00	0.00	100.00%
Total	582,167,228.63	19,352,657.12

Basis for determining the portfolio:

Other receivables for which provision for bad debts is withdrawn as per balance percentage method in portfolio:

==> picture [175 x 11] intentionally omitted <==

Other receivables for which provision for bad debts is withdrawn as per other methods in portfolio:

� Applicable □ Not Applicable

Ending balance

		Ending balance
			Withdrawal percentage
Age	Other receivables	Provision for bad debts	(%)
Petty cash and
equity
incentive	102,470,152.22	0.00	0.00
Account balance
of the third
party payment
platform	30,731,403.56	0.00	0.00
Total	133,201,555.78	0.00	0.00

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FINANCIAL INFORMATION OF LESHI INTERNET

(2) Provision for bad debts withdrawn, recovered or reversed in the current period In the current period, the provision for bad debts withdrawn amounted to RMB20,341,897.46, and the provision for bad debts recovered or reversed was RMB0.00.

• (3) Other receivables actually written off in the current period

Of which, important other receivables written off:

Unit: RMB

							Whether the
							amount is
						Write-off	generated by
			Nature of other	Amount written	Write-off	procedures	connected
**Name **	**of **	entity	receivables	off	reason	implemented	transactions

Description of other receivables written off:

• (4) Other receivables classified by nature of payment

Unit: RMB

	Ending book	Opening book
Nature of payment	balance	balance
Current account	525,534,069.13	45,329,892.87
Petty cash, deposit and equity incentive	165,103,311.72	36,979,563.15
Account balance of the third party payment platform	30,731,403.56	88,321,682.57
Total	721,368,784.41	170,631,138.59

• (5) Top five balances of other receivables by debtor at the end of the period

Unit: RMB

				Percentage in
				total balance of	Balance of
				other receivables	provision for bad
	Nature of			at the end of the	debts at the end
Name of entity	payment	Ending balance	Age	period	of the period
LeTV E-commerce	Current account	430,586,764.30	Within 1 year	59.69%	12,917,602.93
(Beijing) Co., Ltd.
Equity incentive	Equity incentive	90,678,493.22	1-3 years	12.57%	0.00
Beijing Jingfang	Current account	50,430,063.56	Within 1 year	6.99%	1,512,901.91
International Trade Co.,
Ltd.
Beijing Zhongmin	Current account	19,611,652.40	Within 1 year	2.72%	588,349.57
Chuangzhan Investment
Consulting Co., Ltd.
Third party platform	Account balance of	10,534,918.42	Within 1 year	1.46%	0.00
(paypal)	the third party
	payment platform
Total	—	601,841,891.90	—	83.43%	15,018,854.41

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FINANCIAL INFORMATION OF LESHI INTERNET

• (6) Government subsidy related receivables

Unit: RMB

Estimated time Name of project of receiving the receiving subsidies and the government amount and Name of entity subsidies Ending balance Ending age basis thereof

• (7) Recognition of other receivables terminated due to transfer of financial assets

• (8) Assets and liabilities formed by transfer of other receivables and continuous involvement

Other descriptions:

10. Inventories

Whether the Company needs to comply with the disclosure requirements for the real estate industry

No

• (1) Inventories by category

Unit: RMB

		Ending balance			Opening balance
		Provision for			Provision for
Items	Book balance	depreciation	Book value	Book balance	depreciation	Book value
Raw materials	54,071,136.52	0.00	54,071,136.52	62,403,803.34	0.00	62,403,803.34
Products in
process	16,200,000.00	0.00	16,200,000.00	0.00	0.00	0.00
Commodities
in stock	901,143,295.64	29,844,291.01	871,299,004.63	1,071,744,659.69	3,300,877.24 1,068,443,782.45
Consigned
finished
goods	3,609,255.59	0.00	3,609,255.59	7,939,839.28	0.00	7,939,839.28
Total	975,023,687.75	29,844,291.01	945,179,396.74	1,142,088,302.31	3,300,877.24 1,138,787,425.07

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FINANCIAL INFORMATION OF LESHI INTERNET

Whether the Company needs to comply with the disclosure requirements set out in the Guidelines No. 4 of the Shenzhen Stock Exchange on the Disclosure about Growth Enterprise Market — the Energy Conservation and Environmental Protection Operation of Listed Companies :

No

Whether the Company needs to comply with the disclosure requirements set out in the Guidelines No.1 of the Shenzhen Stock Exchange on the Disclosure about Growth Enterprise Market — Broadcasting, Film and Television Operation of Listed Companies :

Whether the Company needs to comply with the disclosure requirements set out in the Guidelines No. 5 of the Shenzhen Stock Exchange on the Disclosure about Growth Enterprise Market — Internet Game Operation of Listed Companies :

• (2) Provision for inventory depreciation

Unit: RMB

		Increase in the current period	Increase in the current period	Decrease in the current period	Decrease in the current period	Decrease in the current period
				Reversal or
Items	Opening balance	Withdrawal	Others	charge-off		Others	Ending balance
Raw materials	0.00	0.00	0.00		0.00	0.00		0.00
Products in
process	0.00	0.00	0.00		0.00	0.00		0.00
Commodities
in stock	3,300,877.24	26,543,413.77	0.00		0.00	0.00	29,844,291.01
Consigned
finished
goods	0.00	0.00	0.00		0.00	0.00		0.00
Total	3,300,877.24	26,543,413.77	0.00		0.00	0.00	29,844,291.01

• (3) Description of capitalization amount of borrowing costs in the ending balance of inventories

• (4) Unsettled assets after project completion formed by construction contract at the end of the period

None

1. Assets classified as held for sale

2. Non-current assets maturing with one year

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

13. Other current assets

Unit: RMB

Items Ending balance Opening balance Input tax to be deducted 606,160,391.44 204,349,614.99 Bank financial products 623,482,899.96 63,266,852.34 Funds incurred by co-production of films 0.00 23,000,000.00 Total 1,229,643,291.40 290,616,467.33

14. Available-for-sale financial assets

• (1) Available-for-sale financial assets

Unit: RMB

		Ending balance				Opening balance
		Provision for				Provision for
Items	Book balance	impairment	Book value	Book balance		impairment	Book value
Available-for-sale
equity
instruments	0.00	0.00	0.00		0.00	0.00	0.00
Available-for-sale
equity
instruments	1,692,029,135.86	1,500,000.00 1,690,529,135.86		159,529,787.23		0.00	159,529,787.23
Measured at
fair value	66,395,362.55	0.00	66,395,362.55	85,748,670.26		0.00	85,748,670.26
Measured by
cost	1,625,633,773.31	1,500,000.00 1,624,133,773.31		73,781,116.97		0.00	73,781,116.97
Total	1,692,029,135.86	1,500,000.00 1,690,529,135.86		159,529,787.23		0.00	159,529,787.23

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APPENDIX II

• (2) Available-for-sale financial assets measured at fair value at the end of the period

Unit: RMB

Category of available-for-sale	Available-for-sale	Available-for-sale
financial assets	equity instruments	debt instruments	Total
Cost of equity instrument/amortized
cost of debt instrument	0.00	0.00	0.00
Fair value	66,395,362.55	0.00	66,395,362.55
Accumulative amount of the change in
fair value stated as other
consolidated revenue	-14,280,357.12	0.00	-14,280,357.12
Amount of provision for impairment	0.00	0.00	0.00

(3) Available-for-sale financial assets measured by cost at the end of the period

Unit: RMB

		Book balance	Book balance				**Provision for **	impairment		Percentage of	Cash bonus
			Decrease in				Increase in	Decrease in		equity in the	of the
	Beginning of the	Increase in the	**the **	current	End of the	Beginning of	the current	the current	End of the	invested	current
Invested entity	period	current period		period	period	the period	period	period	period	entity	period
Xiyue Animation (Hangzhou)
Co., Ltd.	0.00	10,000,000.00		0.00	10,000,000.00					4.55%	0.00
Wuhan DDMC Culture Co.,
Ltd.	27,609,163.00	0.00		0.00	27,609,163.00					1.43%	0.00
LeTV Sports Culture
Development (Beijing) Co.,
Ltd.	38,971,953.97	0.00		0.00	38,971,953.97					10.34%	0.00
LeTV E-commerce (Beijing)
Co., Ltd.	0.00	1,500,000.00		0.00	1,500,000.00					15.00%	0.00
Khorgos Qiyeshu Film & TV
Co., Ltd.	0.00	2,000,000.00		0.00	2,000,000.00					20.00%	0.00
Lesen Investment
Management Center
(limited partnership) in
Hangzhou Bay New Zone,
Ningbo	0.00	20,000,000.00		0.00	20,000,000.00					36.30%	0.00
Shanxi Ruixin Zhida Media
Technology Co., Ltd.	1,000,000.00	0.00		0.00	1,000,000.00					10.00%	0.00
Cymbidium Yushu (Beijing)
Technology Co., Ltd.	6,200,000.00	0.00		0.00	6,200,000.00					1.18%	0.00
LeTV Chuangjing Technology
(Beijing) Co., Ltd.	0.00	300,000,000.00		0.00	300,000,000.00					12.50%	0.00
Coolpad Group Limited	0.00	888,352,656.34		0.00	888,352,656.34					10.97%	0.00
Shenzhen SuperD Technology
Co., Ltd.	0.00	300,000,000.00		0.00	300,000,000.00					10.00%	0.00
Shenzhen Huixinwangqiao
Internet Financial
Technology Service Co.,
Ltd.	0.00	30,000,000.00		0.00	30,000,000.00					10.00%	0.00
Total	73,781,116.97	1,551,852,656.34		0.00	1,625,633,773.31					—	0.00

— 357 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (4) Changes in impairment of available-for-sale financial assets during the reporting period

Unit: RMB

Category of available-for-sale	Available-for-sale	Available-for-sale
financial assets	equity instruments	debt instruments	Total
Impairment balances have been accrued
at the beginning of the period	0.00	0.00	0.00
Provision made in the current period	1,500,000.00	0.00	1,500,000.00
Of which: transfer from other
consolidated revenue	0.00	0.00	0.00
Decrease in the current period	0.00	0.00	0.00
Of which: reversal of recovery in fair
value thereafter	0.00	0.00	0.00
Impairment balances have been accrued
at the end of the period	1,500,000.00	0.00	1,500,000.00

• (5) The ending fair value of available-for-sale equity instruments drops significantly or not temporarily but there is no provision for impairment

Unit: RMB

			Drop in the fair			The reason why
Available-for-			value with		Amount of	no provision for
sale equity		Ending fair	respect to the	Months of	provision for	impairment is
instruments	Investment cost	value	cost	continuous drop	impairment	made

Other descriptions

1. Held-to-maturity investments

None

1. Long-term receivables

None

— 358 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

1. Long-term equity investment

==> picture [456 x 259] intentionally omitted <==

----- Start of picture text -----

Unit: RMB
Increase/decrease in the current period
Investment Cash
gains/losses dividends or Balance of
recognized Adjustments profits Provision provision for
based on to other announced to withdrawn impairment
Invested Investment Investment equity consolidated Other equity be for at the end of
entity Opening balance added reduced method revenue changes distributed impairment Others Ending balance the period
I. Joint ventures
II. Associated enterprises
Beijing Zhiyi
Information
Technology
Co., Ltd. 10,045,254.04 0.00 0.00 234,174.01 0.00 0.00 0.00 0.00 0.00 10,279,428.05 0.00
TCL
Multimedia
Technology
Holdings
Limited 0.00 2,024,427,953.05 0.00 35,594,734.49 0.00 0.00 0.00 0.00 0.00 2,060,022,687.54 0.00
Subtotal 10,045,254.04 2,024,427,953.05 0.00 35,828,908.50 0.00 0.00 0.00 0.00 0.00 2,070,302,115.59
Total 10,045,254.04 2,024,427,953.05 0.00 35,828,908.50 0.00 0.00 0.00 0.00 0.00 2,070,302,115.59 0.00
----- End of picture text -----

1. Investment real estate

2. (1) Investment real estate measured by cost

3. Applicable � Not Applicable

4. (2) Investment real estate measured by fair value

5. Applicable � Not Applicable

6. (3) Investment real estate to which a certificate of title has not been obtained

— 359 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Fixed assets

2. (1) Fixed assets

Unit: RMB

				Electronic
			Transport	equipment and
Items			equipment	others	Total
I.	Original value:
	1.	Opening balance	10,384,851.04	770,767,232.84	781,152,083.88
	2.	Increase in the current
		period	2,348,400.00	943,148,984.82	945,497,384.82
		(1) Purchase	2,348,400.00	943,148,984.82	945,497,384.82
		(2) Carried over from
		construction in progress	0.00	0.00	0.00
		(3) Increase from merger of
		enterprises	0.00	0.00	0.00
	3.	Decrease in the current
		period	0.00	232,229,123.21	232,229,123.21
		(1) Disposal or scrapping	0.00	232,229,123.21	232,229,123.21
	4.	Ending balance	12,733,251.04	1,481,687,094.45	1,494,420,345.49
II.	Accumulated depreciation
	1.	Opening balance	8,324,170.32	143,479,723.90	151,803,894.22
	2.	Increase in the current
		period	1,161,257.05	208,110,847.34	209,272,104.39
		(1) Withdrawal	1,161,257.05	208,110,847.34	209,272,104.39
	3.	Decrease in the current
		period	0.00	6,971,288.14	6,971,288.14
		(1) Disposal or scrapping	0.00	6,971,288.14	6,971,288.14
	4.	Ending balance	9,485,427.37	344,619,283.10	354,104,710.47
III.	Provision for depreciation
	1.	Opening balance	0.00	0.00	0.00
	2.	Increase in the current
		period	0.00	0.00	0.00
		(1) Withdrawal	0.00	0.00	0.00
	3.	Decrease in the current
		period	0.00	0.00	0.00
		(1) Disposal or scrapping	0.00	0.00	0.00
	4.	Ending balance	0.00	0.00	0.00
IV.	Book	value
	1.	Book value at the end of the
		period	3,247,823.67	1,137,067,811.35	1,140,315,635.02
	2.	Book value at the beginning
		of the period	2,060,680.72	627,287,508.94	629,348,189.66

— 360 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (2) Fixed assets temporarily idle

• (3) Fixed assets acquired under finance leases

Unit: RMB

Original book Cumulative Provision for Items value depreciation impairment Book value Electronic equipment and others 215,711,378.74 61,065,751.79 0.00 154,645,626.95 Total 215,711,378.74 61,065,751.79 0.00 154,645,626.95

Items

• (4) Fixed assets leased out under operating lease

• (5) Fixed assets to which a certificate of title has not been obtained

• Construction in progress

None

1. Project materials

None

1. Disposal of fixed assets

None

1. Production-type biological assets

2. (1) Production-type biological assets measured by cost

3. Applicable � Not Applicable

4. (2) Production-type biological assets measured by fair value

□ Applicable � Not Applicable

1. Oil and gas assets

2. Applicable � Not Applicable

— 361 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

25. Intangible assets

(1) Intangible assets

Whether the Company needs to comply with the disclosure requirements set out in the Guidelines No. 5 of the Shenzhen Stock Exchange on the Disclosure about Growth Enterprise Market — Internet Game Operation of Listed Companies :

□ Yes � No

Unit: RMB

							Movie and
			Land use	Patent	Non-patented		television
Items			right	right	technology	System software	copyrights	Total
I.	Original value
	1.	Opening balance			778,394,046.02	485,011,216.70	6,099,664,841.86	7,363,070,104.58
	2.	Increase in the current
		period			469,883,411.78	459,740,500.63	3,179,421,459.67	4,109,045,372.08
		(1) Purchase			18,250,138.58	16,938,588.90	3,179,421,459.67	3,214,610,187.15
		(2) In-house R&D			451,633,273.20	442,801,911.73	0.00	894,435,184.93
		(3) Increase from
		merger of
		enterprises
	3.	Decrease in the current
		period			0.00	0.00	1,233,149,772.77	1,233,149,772.77
		(1) Disposal			0.00	0.00	62,530,007.49	62,530,007.49
		(2) Maturity			0.00	0.00	1,170,619,765.28	1,170,619,765.28
	4.	Ending balance			1,248,277,457.80	944,751,717.33	8,045,936,528.76	10,238,965,703.89
II.	Cumulative amortization
	1.	Opening balance			135,680,712.81	73,572,086.22	2,268,820,836.61	2,478,073,635.64
	2.	Increase in the current
		period			88,043,130.69	83,666,343.42	1,899,726,815.01	2,071,436,289.12
		(1) Withdrawal			88,043,130.69	83,666,343.42	1,899,726,815.01	2,071,436,289.12
	3.	Decrease in the current
		period			0.00	0.00	1,197,726,298.31	1,197,726,298.31
		(1) Disposal			0.00	0.00	27,106,533.03	27,106,533.03
		(2) Maturity			0.00	0.00	1,170,619,765.28	1,170,619,765.28
	4.	Ending balance			223,723,843.50	157,238,429.64	2,970,821,353.31	3,351,783,626.45
III.	Provision for depreciation
	1.	Opening balance			4,609,325.83	0.00	554,697.13	5,164,022.96
	2.	Increase in the current
		period			0.00	0.00	0.00	0.00
		(1) Withdrawal			0.00	0.00	0.00	0.00
	3.	Decrease in the current
		period			0.00	0.00	0.00	0.00
	(1)	Disposal			0.00	0.00	0.00	0.00
	4.	Ending balance			4,609,325.83	0.00	554,697.13	5,164,022.96
IV.	Book	value
	1.	Book value at the end of
		the period			1,019,944,288.47	787,513,287.69	5,074,560,478.32	6,882,018,054.48
	2.	Book value at the
		beginning of the period			638,104,007.38	411,439,130.48	3,830,289,308.12	4,879,832,445.98

— 362 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

At the end of the period, the intangible assets formed through in-house R&D of the Company accounted for 20.83% of the balance of intangible assets.

26. Development expenses

Unit: RMB

Items	Opening balance	Increase in the current period	Increase in the current period	Decrease in the current period	Decrease in the current period	Ending balance
Item 2	26,083,494.01	4,206,579.78	0.00	30,290,073.79	0.00	0.00
Item 3	50,149,772.18	435,840.14	0.00	50,585,612.32	0.00	0.00
Item 10	24,148,362.64	0.00	0.00	24,148,362.64	0.00	0.00
Item 13	24,328,998.49	493,248.38	0.00	24,822,246.87	0.00	0.00
Item 14	20,341,099.66	0.00	0.00	20,341,099.66	0.00	0.00
Item 15	26,132,255.68	203,697.52	0.00	26,335,953.20	0.00	0.00
Item 17	36,404,575.98	9,219,311.73	0.00	45,559,785.15	64,102.56	0.00
Item 30	20,587,898.73	23,748,835.76	0.00	0.00	0.00	44,336,734.49
Item 39	447,799.67	0.00	0.00	447,799.67	0.00	0.00
Item 40	275,913.04	0.00	0.00	0.00	275,913.04	0.00
Item 43	441,324.56	0.00	0.00	0.00	441,324.56	0.00
Item 44	118,457.74	0.00	0.00	0.00	118,457.74	0.00
Item 46	1,338,513.64	58,119.66	0.00	0.00	1,396,633.30	0.00
Item 55	514,462.11	0.00	0.00	0.00	514,462.11	0.00
Item 56	177,334.92	0.00	0.00	0.00	177,334.92	0.00
Item 57	5,936,971.99	812,630.99	0.00	0.00	0.00	6,749,602.98
Item 61	6,405,043.69	2,202,812.78	0.00	8,607,856.47	0.00	0.00
Item 62	1,953,620.81	53,946,618.96	0.00	55,590,502.67	309,737.10	0.00
Item 63	3,702,669.82	77,610,676.99	0.00	80,464,054.41	849,292.40	0.00
Item 64	4,311,206.48	32,344,383.12	0.00	32,736,487.12	425,529.21	3,493,573.27
Item 65	1,433,019.08	3,030,771.66	0.00	4,463,790.74	0.00	0.00
Item 66	3,847,983.25	11,581,811.23	0.00	0.00	0.00	15,429,794.48
Item 67	303,801.47	1,236,817.53	0.00	1,540,619.00	0.00	0.00
Item 68	3,013,556.83	7,382,208.00	0.00	5,719,680.50	22,251.33	4,653,833.00
Item 69	2,495,869.40	8,097,612.18	0.00	1,831,059.20	121,493.44	8,640,928.94
Item 70	1,657,156.16	23,659,565.56	0.00	25,316,721.72	0.00	0.00
Item 71	4,984,814.58	4,563,468.90	0.00	7,725,443.47	1,822,840.01	0.00
Item 72	1,387,452.96	9,988,970.35	0.00	0.00	0.00	11,376,423.31
Item 73	1,265,703.53	5,644,796.12	0.00	0.00	0.00	6,910,499.65
Item 74	3,008,997.57	6,331,461.61	0.00	0.00	0.00	9,340,459.18
Item 76	8,873,981.06	4,207,334.85	0.00	13,081,315.91	0.00	0.00
Item 77	8,617,689.23	6,306,563.82	0.00	14,924,253.05	0.00	0.00
Item 78	1,674,109.17	25,184,655.25	0.00	26,858,764.42	0.00	0.00
Item 80	304,953.40	1,067,789.85	0.00	1,372,743.25	0.00	0.00
Item 81	240,602.77	984,133.72	0.00	1,224,736.49	0.00	0.00
Item 82	12,148,622.91	10,747,877.52	0.00	22,896,500.43	0.00	0.00
Item 83	1,382,351.14	5,402,525.29	0.00	0.00	0.00	6,784,876.43
Item 85	30,313,341.30	57,205,379.87	0.00	87,518,721.17	0.00	0.00
Item 86	15,319,819.64	6,314,630.76	0.00	21,634,450.40	0.00	0.00

— 363 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items	Opening balance	Increase in the current period	Increase in the current period	Decrease in the current period	Decrease in the current period	Ending balance
Item 87	36,124,678.59	16,595,529.08	0.00	52,720,207.67	0.00	0.00
Item 88	161,273.44	3,391,335.10	0.00	3,552,608.54	0.00	0.00
Item 89	10,112,877.06	3,665,063.18	0.00	13,777,940.24	0.00	0.00
Item 90	8,219,583.06	8,984,221.35	0.00	17,203,804.41	0.00	0.00
Item 91	9,870,655.81	20,161,913.87	0.00	30,032,569.68	0.00	0.00
Item 92	1,632,968.01	1,886,442.83	0.00	3,519,410.84	0.00	0.00
Item 93	1,959,617.72	6,978,536.62	0.00	0.00	0.00	8,938,154.34
Item 94	0.00	68,225,074.69	0.00	0.00	0.00	68,225,074.69
Item 95	0.00	882,813.39	0.00	0.00	0.00	882,813.39
Item 96	0.00	3,637,588.59	0.00	3,622,924.59	14,664.00	0.00
Item 97	0.00	1,316,192.62	0.00	0.00	1,316,192.62	0.00
Item 98	0.00	15,450,754.85	0.00	15,345,516.56	105,238.29	0.00
Item 99	0.00	27,668,685.39	0.00	24,418,076.87	3,250,608.52	0.00
Item 100	0.00	92,857,410.26	0.00	0.00	0.00	92,857,410.26
Item 101	0.00	7,647,693.86	0.00	0.00	0.00	7,647,693.86
Item 102	0.00	1,207,514.11	0.00	0.00	0.00	1,207,514.11
Item 103	0.00	24,973,013.29	0.00	0.00	0.00	24,973,013.29
Item 104	0.00	2,089,744.94	0.00	0.00	0.00	2,089,744.94
Item 105	0.00	33,333,369.78	0.00	0.00	0.00	33,333,369.78
Item 106	0.00	53,330,387.78	0.00	0.00	0.00	53,330,387.78
Item 107	0.00	12,666,668.63	0.00	0.00	0.00	12,666,668.63
Item 108	0.00	9,394,164.01	0.00	0.00	0.00	9,394,164.01
Item 109	0.00	1,981,632.36	0.00	0.00	0.00	1,981,632.36
Item 110	0.00	12,353,755.94	0.00	0.00	0.00	12,353,755.94
Item 111	0.00	54,330,202.56	0.00	0.00	0.00	54,330,202.56
Item 112	0.00	56,717,769.01	0.00	0.00	0.00	56,717,769.01
Item 113	0.00	58,190,318.58	0.00	0.00	0.00	58,190,318.58
Item 114	0.00	14,105,143.57	0.00	0.00	0.00	14,105,143.57
Item 115	0.00	7,223,604.06	0.00	0.00	0.00	7,223,604.06
Item 116	0.00	21,762,353.05	0.00	21,762,353.05	0.00	0.00
Item 117	0.00	12,550,848.17	0.00	0.00	0.00	12,550,848.17
Item 118	0.00	8,104,677.15	0.00	0.00	0.00	8,104,677.15
Item 119	0.00	13,604,859.40	0.00	0.00	0.00	13,604,859.40
Item 120	0.00	21,075,719.57	0.00	21,075,719.57	0.00	0.00
Item 121	0.00	12,747,483.02	0.00	0.00	0.00	12,747,483.02
Item 122	0.00	22,423,019.17	0.00	22,423,019.17	0.00	0.00
Item 123	0.00	28,942,400.02	0.00	28,942,400.02	0.00	0.00
Item 124	0.00	11,405,125.96	0.00	0.00	0.00	11,405,125.96
Total	424,155,254.98	1,178,084,159.69	0.00	894,435,184.93	11,226,075.15	696,578,154.59

— 364 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

• (2) Time and specific basis of capitalization:

The Group’s research & development activities are divided into seven phases for project management: pre-research, project approval, demand schedule, design, implementation, testing and publication of completion of project. The “design” and links before it belong to the research phase and expenditures in this phase are directly stated as current gain/loss. Entry into the “implementation” link upon completion of “design” phase marks the beginning of the development phase. The expenditures during the development phase are capitalized and recognized as intangible assets when meeting the following conditions, otherwise they shall be stated as current gain/loss:

• A. The technical feasibility of completing the intangible asset so that it will be available for use or sale;

• B. Its intention to complete the intangible asset and use or sell it;

• C. The means of intangible assets to produce economic interest include the means which can certify that the products produced by the intangible assets have market or the intangible assets have market;

• D. The availability of adequate technical, financial and other resources to complete the development and to use or sell the intangible asset;

• E. Its ability to measure reliably the expenditure attributable to the intangible asset during its development.

• Goodwill

• (1) Original book value of goodwill

Unit: RMB

		Increase in	Decrease in
Name of invested entity or		the current	the current	Ending
matters forming goodwill	Opening balance	period	period	balance
Dongyang LeTV Flower Film
& TV Co., Ltd.	747,585,265.47	0.00	0.00	747,585,265.47
Total	747,585,265.47	0.00	0.00	747,585,265.47

• (2) Provision for impairment of goodwill

At the end of the reporting period, the Company integrated the goodwill with relevant assets or asset groups and conducted an impairment test on them as a whole, which showed that there were no signs of impairment.

— 365 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Long-term expenses to be amortized

Unit: RMB

			Amortization
		Increase in	amount in	Other
	Opening	the current	the current	amount of	Ending
Items	balance	period	period	deduction	balance
Expenses for
improvement of fixed
assets acquired under
operating lease	1,082,073.15	43,132.13	605,468.79	0.00	519,736.49
Cooperative operation
service fee	0.00	1,100,000.00	73,333.33	0.00	1,026,666.67
Total	1,082,073.15	1,143,132.13	678,802.12	0.00	1,546,403.16

1. Deferred tax assets/deferred tax liabilities

2. (1) Deferred tax assets not offset

Unit: RMB

	**Ending **	**Ending **	balance	**Opening **	balance
	Deductible			Deductible
	temporary		Deferred tax	temporary	Deferred tax
Items	difference		assets	difference	assets
Unrealized profit of internal
transaction	169,073,742.93		25,361,061.44	188,929,607.36	47,232,401.84
Deductible loss	2,602,199,425.40	650,549,856.36		1,696,948,005.00	424,237,001.25
Provision for bad debts	463,494,431.03		78,612,500.65	204,414,434.86	33,878,127.25
Provision for inventory
depreciation	29,844,291.01		7,461,072.75	3,300,877.24	825,219.31
Provision for impairment of
intangible assets	5,023,702.04		753,555.31	5,164,022.99	788,635.54
Amortized interest of finance
leases	4,035,837.37		605,375.60	1,933,794.55	290,069.18
Total	3,273,671,429.78	763,343,422.11		2,100,690,742.00	507,251,454.37

— 366 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (2) Deferred tax liabilities not offset

Unit: RMB

	**Ending **	balance	**Opening **	balance
	Taxable		Taxable
	temporary	Deferred tax	temporary	Deferred tax
Items	differences	liabilities	differences	liabilities
Accelerated depreciation of
assets	20,252,349.47	3,037,852.42	9,343,861.95	1,401,579.29
Unrealized loss of internal
transaction	0.00	0.00	33,921,882.92	5,088,282.44
Total	20,252,349.47	3,037,852.42	43,265,744.87	6,489,861.73

• (3) Deferred tax assets or deferred tax liabilities presented with the net amount after offset

Unit: RMB

					Amount of
					mutual offset
			Amount of		between	Beginning
			mutual offset	Ending balance	deferred tax	balance of
			between deferred	of deferred tax	assets and	deferred tax
			tax assets and	assets or	deferred tax	assets or
			deferred tax	deferred tax	liabilities at	deferred tax
			liabilities at the	liabilities	the beginning	liabilities
Items			end of the period	after offset	of the period	after offset
Deferred	tax	assets	763,343,422.11			507,251,454.37
Deferred	tax	liabilities	3,037,852.42			6,489,861.73

• (4) Details of unrecognized deferred tax assets

Unit: RMB

Items Ending balance Opening balance Deductible temporary difference 27,161,632.07 22,115.50 Deductible loss 513,689,800.64 113,377,435.58 Total 540,851,432.71 113,399,551.08

— 367 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

(5) Deductible loss of unrecognized deferred tax assets will mature in the following years

			Unit: RMB
Year	Ending balance	Opening balance	Notes
2016	43,294.74	43,294.74
2017	1,394.51	1,394.51
2018	5,500,242.67	5,500,242.67
2019	22,286,866.22	22,286,866.22
2020	85,545,637.44	85,545,637.44
2021	400,312,365.06	0.00
Total	513,689,800.64	113,377,435.58	—

Other descriptions:

30. Other non-current assets

Items Advance payment of royalties Advance payment of investment fund Total	Unit: RMB Ending balance Opening balance 1,574,299,634.42 511,528,626.09 84,000,000.00 0.00 1,658,299,634.42 511,528,626.09	Unit: RMB Ending balance Opening balance 1,574,299,634.42 511,528,626.09 84,000,000.00 0.00 1,658,299,634.42 511,528,626.09
		511,528,626.09

Other descriptions:

31. Short-term loans

(1) Classification of short-term loans

Items Pledged loan Mortgaged loan Guaranteed loan Credit loan Total	Ending balance 92,000,000.00 0.00 2,508,361,000.00 0.00 2,600,361,000.00	Unit: RMB Opening balance 0.00 0.00 1,635,000,000.00 100,000,000.00
		1,735,000,000.00

— 368 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (2) Overdue short-term loans

The overdue short-term loans in the current period was RMB0.0 in total, in particular, the important overdue short-term loans are as follows:

1. Financial liabilities measured at fair value with changes stated as current gains/losses

33. Derivative financial liabilities

• Applicable � Not Applicable

34. Notes payable

Unit: RMB

Classification Ending balance Opening balance Bank acceptance bill 226,884,006.72 0.00 Total 226,884,006.72

The overdue note payable in the current period was RMB0.00.

35. Accounts payable

• (1) Presentation of accounts payable

Unit: RMB

Items Payables for goods Royalties payable Total

Ending balance Opening balance

4,166,340,733.13 2,131,714,086.77 1,254,906,758.96 1,099,029,236.09 5,421,247,492.09 3,230,743,322.86

— 369 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (2) Important accounts payable with an age of over one year

Unit: RMB

		Reasons for not being
		paid off or carried
Items	Ending balance	forward
Le Vision Pictures (Tianjin) Co., Ltd.	46,048,960.00	Not yet settled
Le Vision Pictures (Beijing) Co., Ltd.	18,633,500.00	Not yet settled
Xi’an Qujiang Chuntian Ronghe Film &
Television Media Co., Ltd.	15,750,000.00	Not yet settled
Xi’an Aojinbai Film Co., Ltd.	15,050,000.00	Not yet settled
Zhejiang Qiangshi Media Co., Ltd.	13,600,000.00	Not yet settled
Shanghai International Circuit Management and
Development Co., Ltd.	13,313,415.00	Not yet settled
Shanghai Croton Entertainment Co., Ltd.	12,960,000.00	Not yet settled
Beijing Xiying Hantang Media Co., Ltd.	12,000,000.00	Not yet settled
Hunan Mango Media Co., Ltd.	11,400,000.00	Not yet settled
Beijing Galloping Horse One Film and TV
Production CO., Ltd.	11,305,000.00	Not yet settled
Heyi Information Technology (Beijing) Co., Ltd.	10,300,000.00	Not yet settled
Tianjin Huachuang Media Technology Co., Ltd.	10,000,000.00	Not yet settled
Total	190,360,875.00	—

36. Advance receipts

(1) Presentation of advance receipts

Items Ending balance Payment for commodities received in advance 80,886,166.44 Royalties received in advance 101,783,754.62 Total 182,669,921.06	Unit: RMB Opening balance 1,700,093,624.66 32,982,626.15
	1,733,076,250.81

— 370 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Remuneration payable to employees

2. (1) Presentation of remuneration payable to employees

Unit: RMB

Increase in the Decrease in the Items Opening balance current period current period Ending balance

I. Short-term remuneration II. Post-employment benefit - defined contribution plan III. Termination benefit Total	3,781,580.10 1,376,097.01 0.00 5,157,677.11	1,766,387,022.56 208,707,158.61 0.00 1,975,094,181.17	1,762,083,034.74 208,558,886.45 0.00 1,970,641,921.19	8,085,567.92 1,524,369.17 0.00
				9,609,937.09

• (2) Presentation of short-term remuneration

Unit: RMB

Items Opening balance 1. Salary, bonus, subsidy and grant 2,339,984.71 2. Employee welfare 0.00 3. Social insurance premium 799,477.47 Including: medical insurance 685,518.73 Work-related injury insurance premium 57,137.46 Childbearing insurance premium 56,821.28 4. Housing provident fund 642,117.92 5. Trade union fee and staff education fee 0.00 6. Short-term compensated absences 0.00 Total 3,781,580.10	Increase in the current period 1,506,466,293.63 16,457,336.53 113,014,507.38 101,822,645.60 3,061,281.25 8,130,580.53 129,467,804.78 981,080.24 0.00 1,766,387,022.56	Decrease in the current period Ending balance 1,501,975,389.72 6,830,888.62 16,457,336.53 0.00 113,022,442.93 791,541.92 101,818,350.68 689,813.65 3,063,656.94 54,761.77 8,140,435.31 46,966.50 129,769,618.56 340,304.14 858,247.00 122,833.24 0.00 0.00 1,762,083,034.74 8,085,567.92	Decrease in the current period Ending balance 1,501,975,389.72 6,830,888.62 16,457,336.53 0.00 113,022,442.93 791,541.92 101,818,350.68 689,813.65 3,063,656.94 54,761.77 8,140,435.31 46,966.50 129,769,618.56 340,304.14 858,247.00 122,833.24 0.00 0.00 1,762,083,034.74 8,085,567.92
			8,085,567.92

— 371 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (3) Presentation of defined contribution plan

Unit: RMB

Increase in the Decrease in the Items Opening balance current period current period Ending balance 1. Basic endowment insurance 1,258,684.37 199,367,807.95 199,184,801.24 1,441,691.08 2. Unemployment insurance premium 117,412.64 9,339,350.66 9,374,085.21 82,678.09 3. Payment of enterprise annuity 0.00 0.00 0.00 0.00 Total 1,376,097.01 208,707,158.61 208,558,886.45 1,524,369.17

Other descriptions:

1. Taxes and fees payable

Unit: RMB

Items	Ending balance	Opening balance
VAT	293,840,460.78	240,799,575.51
Enterprise income tax	172,243,800.92	174,595,458.42
Personal income tax	138,515,715.68	65,904,242.49
Municipal maintenance and
construction tax	813,622.22	2,452,731.57
Education surcharge	1,324,101.50	2,037,505.71
Construction fee for cultural
undertakings	164,395,020.43	90,335,129.65
Others	3,066,189.96	1,425,129.01
Total	774,198,911.49	577,549,772.36

— 372 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

39. Interest payable

		Unit: RMB
Items	Ending balance	Opening balance
Interest of long-term loans with interest paid by
instalments and entire principal paid when due	175,000.00	0.00
Interest rate on debenture	50,203,956.00	50,211,693.53
Interest payable of short-term loans	17,505,105.81	2,433,512.85
Interest of preferred stocks\perpetual bonds
classified as financial liabilities	7,213,454.54	0.00
Fixed income of priority limited partners	6,778,210.68	0.00
Total	81,875,727.03	52,645,206.38

There was no outstanding interest at the end of the period.

40. Dividends payable

		Unit: RMB
Items	Ending balance	Opening balance
Common stock dividends	25,850,903.00	0.00
Dividends of preferred
stocks\perpetual bonds
classified as equity
instruments	0.00	0.00
Total	25,850,903.00	0.00

41. Other payables

(1) Presentation of other payables by nature of payment

			Unit: RMB
Items		Ending balance	Opening balance
Current	account	79,327,546.20	11,729,115.37
Margin	and deposit	7,846,908.46	3,518,213.52
Others		17,855,224.02	4,123,363.97
Total		105,029,678.68	19,370,692.86

— 373 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (2) Important other payables with an age of over one year

This year, there was no important other payables with an age of over one year.

1. Liabilities classified as held for sale

None

1. Non-current liabilities maturing within one year

Unit: RMB

Items Long-term loans maturing within one year Bonds payable maturing within one year Long-term payables maturing within one year Deferred earnings maturing within one year Total	Ending balance Opening balance 300,000,000.00 0.00 1,917,663,484.14 0.00 117,206,555.18 92,405,533.66 311,531,674.18 6,570,167.91 2,646,401,713.50 98,975,701.57	Ending balance Opening balance 300,000,000.00 0.00 1,917,663,484.14 0.00 117,206,555.18 92,405,533.66 311,531,674.18 6,570,167.91 2,646,401,713.50 98,975,701.57
		98,975,701.57

Other descriptions:

1. Other current liabilities

2. Long-term loans

3. (1) Classification of long-term loans

Unit: RMB

Items Pledged loan Guaranteed loan Credit loan Total	Ending balance Opening balance 3,024,445,808.89 0.00 0.00 300,000,000.00 0.00 0.00 3,024,445,808.89 300,000,000.00	Ending balance Opening balance 3,024,445,808.89 0.00 0.00 300,000,000.00 0.00 0.00 3,024,445,808.89 300,000,000.00
		300,000,000.00

— 374 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (2) There was no matured & outstanding long-term loans at the end of the year.

• Bonds payable

• (1) Bonds payable

Unit: RMB

Items Ending balance 15 Letv 01 0.00 15 Letv 02 0.00 Total	Opening balance 985,463,963.74 915,094,386.86
	1,900,558,350.60

• Note: The bonds payable were issued in 2015 with a coupon period of 3 years, which rendered option of increasing coupon rate for issuer and sell-back options for investors at the end of the second year. At the end of the year, such bonds were reclassified as non-current liabilities maturing within one year.

• Long-term payables

• (1) Presentation of long-term payables by nature of payment

Unit: RMB

Items	Ending balance	Opening balance
Finance lease of sale-leaseback
of equipment	159,026,255.68	27,174,449.21
Finance lease equipment	1,687,542.00	9,537,133.48
Unrecognized finance costs	-18,619,570.05	-2,152,092.82
Total	142,094,227.63	34,559,489.87

Other descriptions:

1. Long-term remuneration payable to employees

None

1. Special payables

None

— 375 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

50. Accrued liability

None

51. Deferred earnings

Unit: RMB

Items Government subsidies Unrealized sale-leaseback gains/losses Membership revenue Total	Opening balance 0.00 557,580.45 0.00 557,580.45	Increase in the current period 21,600,000.00 7,684,194.68 459,103,516.71 488,387,711.39	Decrease in the current period 0.00 4,997,281.17 0.00 4,997,281.17	Ending balance Forming reason 21,600,000.00 Government subsidies 3,244,493.96 Unrealized sale-leaseback gains/losses formed by sales type finance lease 459,103,516.71 Deferred membership revenue 483,948,010.67 —

— 376 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Projects involving government subsidies:

Unit: RMB

Indebted projects Opening balance Letv Cloud Computing Western China Headquarters and Innovation Center 0.00 Letv Cloud Computing Western China Headquarters and Innovation Center 0.00 Total 0.00	Increased subsidies in the current period Amount stated as non-operating revenue in the current period 19,000,000.00 0.00 2,600,000.00 0.00 21,600,000.00 0.00	Other changes Ending balance Pertinent to assets/ Pertinent to revenue 0.00 19,000,000.00 Pertinent to assets 0.00 2,600,000.00 Pertinentto revenue 0.00 21,600,000.00 —

Other descriptions:

Note: The revenue-related government subsidy of RMB2.6 million was received by the Group from the management committee of Chengdu Hi-Tech Industrial Development Zone for the project of Letv Cloud Computing Western China Headquarters and Innovation Center, and is used for supporting the innovation & incubation industries of project companies. As at December 31st, 2016, the relevant costs have not yet occurred.

— 377 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

52. Other non-current liabilities

Unit: RMB

Items Loan of Jia Yueting Loan of Jia Yuefang Huaxia Life Insurance Co., Ltd. Leran Investment Management Partnership (limited partnership) in Hangzhou Bay New Zone, Ningbo Wuhu Gopher Asset Management Co., Ltd. Shenzhen Guide Fund Investment Co., Ltd. Total	Ending balance 2,600,718.00 433,735,654.62 400,000,000.00 1,430,000,000.00 2,748,941,000.00 600,000,000.00 5,615,277,372.62	Opening balance 2,070,600,718.00 1,401,735,654.62 0.00 0.00 0.00 0.00
		3,472,336,372.62

53. Share capital

Unit: RMB

				**Increase/decrease in the current **	**Increase/decrease in the current **	period (+, -)
			Issuance of new	Bonus	Transfer from
		Opening balance	shares	shares	capital reserves	Others	Subtotal	Ending balance
Total	shares	1,856,015,158.00	106,642,968.00	0.00	0.00	19,022,001.00	125,664,969.00	1,981,680,127.00

Note: According to the proposal of non-public offering of shares deliberated and approved at the 52nd meeting of the 2nd Board of Directors on May 25th, 2015, the first extraordinary general meeting 2015 on June 11th, 2015 and the 63rd meeting of the 2nd Board of Directors on August 31st, 2015, the Company issued 106,642,968 domestic-listed RMB ordinary shares (A shares) in non-public offering at an issue price of RMB45.01/share, raising RMB4,799,999,989.68 funds. On May 19th, 2016, CSRC issued the Reply on Approving Non-public Offering of Shares of Leshi Internet Information & Technology Corp (Beijing) (Zheng Jian Xu Ke [2016] No. 1089) to approve this offering. On July 31st, 2016, SHINEWING Certified Public Accountants (special general partnership) issued a capital verification report (XYZH/2016XAA10454) for this non-public offering for verification and confirmation.

According to the first extraordinary general meeting 2011 and the 3rd meeting of the 3rd Board of Directors of the Company on November 3rd, 2015, the Company exercised stock options for shares in the third exercise period of the first equity incentive plan, and exercised stock options for 131,233,610,000 shares of 171 incentive targets who applied for exercise, after which 13,123,361.00 shares were increased. Ruihua Certified Public Accounts issued a capital verification report [2016] 01810011 for this exercise.

According to the 3rd extraordinary general meeting 2013, the 4th meeting of the 3rd Board of Directors on November 5th, 2015 and the 20th meeting of the 3rd Board of Directors on May 24th, 2016, the Company granted a total of 817,080 stock options exercisable in the first exercise period to 60 incentive targets by issuing the Company’s stocks to particular investors, and a total of 5,151,520 stock options exercisable in the second exercise period to 300 incentive targets. A total of 5,898,640 stock options above were exercised autonomously, after which 5,898,640 shares were increased.

— 378 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

As at December 31st, 2016, the aforesaid changes in equity have not yet been registered with the industry and commerce authority.

1. Other equity instruments

2. (1) Basic information about preferred stocks, perpetual bonds and other financial instruments outstanding at the end of the period

3. (2) Statement of changes in preferred stocks, perpetual bonds and other financial instruments outstanding at the end of the period

Unit: RMB

	Beginning of	Increase in	Decrease in
Outstanding financial	the period	the current period	the current period	End of the period
instruments	Quantity Book value	Quantity Book value	Quantity Book value	Quantity Book value

Increase/decrease in other equity instruments in the current period, relevant reasons, and the basis for relevant accounting treatment:

Other descriptions:

1. Capital reserve

Unit: RMB

Increase in the Decrease in the Items Opening balance current period current period Ending balance Capital premium (share premium) 287,349,733.56 5,240,161,256.93 0.00 5,527,510,990.49 Other capital reserve 261,799,255.74 455,344,653.14 47,419,261.18 669,724,647.70 Total 549,148,989.30 5,695,505,910.07 47,419,261.18 6,197,235,638.19

Other descriptions, including increase/decrease in the current period and relevant reasons:

Note: This year, the share premium increased by RMB5,240,161,256.93, among which RMB4,614,828,719.79 was generated by proceeds from non-public offering of shares; RMB118,908,536.86 was generated by exercise of share-based payment at maturity; RMB506,424,000.28 was generated by the investment from the minority shareholders Chongqing Strategic Emerging Industry LeCloud Special Equity Investment Fund Joint Venture (limited partnership) and Shanghai Junying Asset Management Co., Ltd. (Limited Partnership).

This year, other capital reserves increased by RMB455,344,653.14, among which RMB142,245,050.92 was attributable to the costs generated by share-based payment in the vesting

— 379 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

period; RMB91,326,151.94 was generated by interests of unpaid loans from the controlling shareholder and associated natural person of the Company which was accounted as equity transaction; RMB221,773,450.28 was generated by transfer from equities of LeTV E-commerce (Beijing) Co., Ltd.

This year, other capital reserves decreased by RMB47,419,261.18, which was the expense in the original vesting period for exercise of share-based payment at maturity this year carried forward from other capital reserves to share premium.

56. Treasury shares

None

57. Other consolidated revenue

Unit: RMB

			Amount incurred in the current period	Amount incurred in the current period	Amount incurred in the current period
			Less: Those
			included
			in other
			consolidated
			income in
			the previous
			period but
			transferred		The amount after	The amount after
		Pre-tax	into the profit		tax attributed to	tax attributed to
		amount in the	or loss in the	Less: Income tax	the parent	minority
Items	Opening balance	current period	current period	expense	company	shareholders	Ending balance
II. Other consolidated revenue
that will be reclassified into
profits/losses	27,837,143.24	26,934,484.45			26,934,484.45		54,771,627.69
Gains/losses from change in
fair value of
available-for-sale financial
assets	5,072,950.59	-19,353,307.71			-19,353,307.71	0.00	-14,280,357.12
Translation difference of
foreign-currency financial
statements	22,764,192.65	46,287,792.16			46,287,792.16	0.00	69,051,984.81
Other consolidated revenue	27,837,143.24	26,934,484.45			26,934,484.45		54,771,627.69

Other descriptions, including adjustment to the initial recognition amount of arbitraged items converted from effective proportion of cash flow hedging gains/losses:

58. Special reserves

None

— 380 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

59. Surplus reserve

Items Opening balance Statutory surplus reserve 179,165,369.15 Discretionary surplus reserve 0.00 Total 179,165,369.15	Unit: RMB Increase in the current period Decrease in the current period Ending balance 107,146,393.44 0.00 286,311,762.59 0.00 0.00 0.00 107,146,393.44 0.00 286,311,762.59	Unit: RMB Increase in the current period Decrease in the current period Ending balance 107,146,393.44 0.00 286,311,762.59 0.00 0.00 0.00 107,146,393.44 0.00 286,311,762.59
		286,311,762.59

Description about surplus reserve, including increase/decrease in the current period and relevant reasons:

The surplus reserve in the current period increased by RMB107,146,393.44, which was the statutory surplus reserve withdrawn according to 10% of the net profit of the parent company of the Group.

60. Undistributed profits

		Unit: RMB
Items	Current period	Last period
Undistributed profits in the last
period before adjustment	1,315,492,772.28	843,360,350.78
Total undistributed profits at the
beginning of the adjustment
period (increase +, decrease -)	0.00	0.00
Undistributed profits in the later
adjustment period	1,315,492,772.28	843,360,350.78
Add: Net profit attributable to
owners of the parent company
in the current period	554,759,227.43	573,027,173.33
Less: Statutory surplus reserve	107,146,393.44	62,200,008.93
Common stock dividends
payable	57,536,469.90	38,694,742.90
Undistributed profits at the end
of the period	1,705,569,136.37	1,315,492,772.28

— 381 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Details of undistributed profits at the beginning of the adjustment period:

• 1). Retroactive adjustments according to the Accounting Standards for Business Enterprises and relevant new provisions affected the undistributed profits at the beginning of the period by RMB .

• 2). Accounting policy changes affected the undistributed profits at the beginning of the period by RMB .

• 3). Material accounting error correction affected the undistributed profits at the beginning of the period by RMB .

• 4). Changes in consolidated scope due to the same control affected the undistributed profits at the beginning of the period by RMB .

• 5). Other adjustments affected the undistributed profit at the beginning of the period by RMB

  • .

• Operating revenue and cost

Unit: RMB

Items Main businesses Other businesses Total	Amount incurred in the current period Revenue Cost 21,831,838,603.07 18,111,457,037.76 119,112,807.40 117,763,526.90 21,950,951,410.47 18,229,220,564.66	Amount incurred in the previous period Revenue Cost 13,016,725,124.12 11,112,009,123.84 0.00 0.00 13,016,725,124.12 11,112,009,123.84	Amount incurred in the previous period Revenue Cost 13,016,725,124.12 11,112,009,123.84 0.00 0.00 13,016,725,124.12 11,112,009,123.84
			11,112,009,123.84

62. Taxes and surcharges

Unit: RMB

	Amount incurred in	Amount incurred in
Items	the current period	the previous period
Municipal maintenance and construction tax	9,838,797.01	5,590,483.52
Education surcharge	4,571,550.97	2,896,010.41
Property tax	361.98	0.00
Land use tax	112.73	0.00
Stamp duty	9,022,365.56	0.00
Business tax	33,631.76	0.00
Local education surcharge	2,567,504.19	1,347,243.20
Construction fee for cultural undertakings	126,074,466.92	84,196,401.81
Others	466,364.72	650,690.17
Total	152,575,155.84	94,680,829.11

— 382 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Other descriptions:

1. Sales expenses

Unit: RMB

	Amount incurred in	Amount incurred in
Items	the current period	the previous period
Advertising production expenses	536,993,237.44	202,228,129.87
Expenses on profit-sharing among members	892,329,060.80	326,176,820.75
Expenses for logistics and after-sales service	483,272,379.20	218,474,543.31
Salary and welfare	323,939,121.58	211,311,497.17
Office and conference expenses	18,459,242.22	21,341,290.04
Consulting service expenses	53,090,232.75	17,141,428.80
Depreciation and rental fees	7,232,993.54	11,834,500.89
Travelling expenses	14,719,075.43	10,932,099.09
Social engagement expenses	5,268,643.86	10,379,167.90
Equity incentive fees	21,089,937.51	7,486,386.17
Transportation and vehicle expenses	2,123,419.99	1,911,436.87
Service fees	6,566,907.71	1,509,888.76
Others	798,774.25	9,588.73
Total	2,365,883,026.28	1,040,736,778.35

Other descriptions:

1. Administrative expenses

Unit: RMB

	Amount incurred in	Amount incurred in
Items	the current period	the previous period
Salary and welfare	236,012,795.70	139,523,984.32
Depreciation, amortization and rental fees	139,126,138.75	83,581,850.38
Consulting fee	96,754,875.51	26,389,184.25
Equity incentive fees	40,877,194.74	17,871,985.33
R&D expenses	19,220,062.29	0.00
Office and conference expenses	18,738,991.24	21,155,980.51
Travelling expenses	16,226,705.70	6,665,475.44
Business management expenses	6,129,363.53	0.00
Taxes	5,624,228.28	7,965,779.35
Service fees	5,445,891.05	1,670,708.60
Social engagement expenses	3,493,040.70	2,373,206.93
Communication expenses	2,720,650.74	1,402,540.16
Fund manager’s remuneration	2,286,543.38	0.00
Others	3,616,992.20	891,399.95
Total	596,273,473.81	309,492,095.22

— 383 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Other descriptions:

65. Financial expense

Unit: RMB

	Amount incurred in	Amount incurred in
Items	the current period	the previous period
Interest expenses	550,138,357.41	284,322,482.32
Less: interest revenue	11,231,600.86	6,185,426.25
Net interest expenses	538,906,756.55	278,137,056.07
Exchange loss	39,336,534.82	23,660,829.57
Less: Exchange revenue	6,745,241.52	2,210,424.01
Net exchange loss	32,591,293.30	21,450,405.56
Commission of third party platform	70,834,863.06	43,202,551.00
Commission and others	5,694,187.14	6,189,586.45
Total	648,027,100.05	348,979,599.08

Other descriptions:

1. Assets impairment loss

Unit: RMB

	Amount incurred in	Amount incurred in
Items	the current period	the previous period
I. Bad debt loss	316,411,264.64	116,852,425.91
II. Loss from inventory depreciation	26,543,413.77	3,300,877.24
V. Impairment loss on long-term equity
investment	1,500,000.00
XIV. Others	7,513,553.74
Total	351,968,232.15	120,153,303.15

1. Revenue from change in fair value

None

— 384 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

68. Investment revenue

		Unit: RMB
	Amount incurred in	Amount incurred in
Items	the current period	the previous period
Revenue from long-term equity investment stated
by equity method	35,828,908.50	45,254.04
Revenue from disposal of long-term equity
investment	0.00	0.00
Revenue from holding financial assets measured
at fair value with changes stated as current
gains/losses	0.00	0.00
Revenue from disposing financial assets
measured at fair value with changes stated as
current gains/losses	0.00	0.00
Revenue from holding held-to-maturity
investment	0.00	0.00
Revenue from holding available-for-sale financial
assets	0.00	0.00
Revenue from disposing available-for-sale
financial assets	0.00	14,165,684.11
Gains of remaining equity re-measured at fair
value after control right loss	0.00	64,524,252.87
Investment revenue from bank financial product	808,194.14	14,246.58
Total	36,637,102.64	78,749,437.60

— 385 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

69. Non-operating revenue

					Unit: RMB
					Amount stated as
	**Amount **	incurred	Amount incurred		non-recurring
	in the current		**in **	the previous	gains/losses in the
Items		period		period	current period
Including: Gains from disposal of fixed
assets		0.00		0.00	0.00
Gains from disposal of intangible
assets		0.00		0.00	0.00
Gains from debt restructuring		0.00		0.00	0.00
Gains from exchange of non-monetary
assets		0.00		0.00	0.00
Donations received		0.00		0.00	0.00
Government subsidies	46,253,493.79		44,987,578.52		46,253,493.79
Others	348,322.93			334.44	348,322.93
Total	46,601,816.72		44,987,912.96		46,601,816.72

Government subsidies stated as current gains/losses:

Unit: RMB

Did the subsidies Reason have an Pertinent for effect on Were the to assets/ issuing profits/ subsidies Amount incurred Amount incurred Pertinent the losses of special in the current in the previous to Subsidy items Issuing body subsidies Nature the year subsidies period period revenue Tianjin Eco-city Cooperation Subsidy Subsidy obtained No No 15,124,236.95 0.00 Pertinent flagship agreement with for meeting the to international Sino-Singapore investment revenue cooperation project Tianjin promotion policies Eco-city or other Management supportive policies Committee of the local government Reward of one-time Finance Reward Subsidy obtained No No 10,000,000.00 0.00 Pertinent settlement Commission of for meeting the to Shenzhen investment revenue Municipality promotion policies (Shen Fu No. or other 103 [2010]) supportive policies of the local government

— 386 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

				Did the
				subsidies
		Reason		have an				Pertinent
		for		effect on	Were the			to assets/
		issuing		profits/	subsidies	Amount incurred	Amount incurred	Pertinent
		the		losses of	special	in the current	in the previous	to
Subsidy items	Issuing body	subsidies	Nature	the year	subsidies	period	period	revenue
Special funds for	Document Guan	Subsidy	Subsidy obtained	No	No	5,080,393.00	0.00	Pertinent
film & TV cultural	Wei Hui No. 10		for engaging in					to
industry	[2016] of the		specific sectors					revenue
development in	Management		and industries
2015	Committee of		encouraged and
	Hengdian		supported by the
	Chinese Film		state (lawfully
	Industrial Park		obtained according
	in Zhejiang		to national
			policies)
Project of building	Cooperation	Subsidy	Subsidy obtained	No	No	5,000,000.00	0.00	Pertinent
Jiangbeizui into a	agreement		for meeting the					to
core financial	between the		investment					revenue
center on the upper	People’s		promotion policies
reaches of Yangtze	Government of		or other
River at an early	Jiangbei		supportive policies
date	District of		of the local
	Chongqing		government
	Municipality
	and LeTV
	Holdings
	(Beijing) Co.,
	Ltd.
Tianjin Eco-city	Cooperation	Subsidy	Subsidy obtained	No	No	4,149,603.39	0.00	Pertinent
flagship	agreement with		for meeting the					to
international	Sino-Singapore		investment					revenue
cooperation project	Tianjin		promotion policies
	Eco-city		or other
	Management		supportive policies
	Committee		of the local
			government
Special funds for	Notice on	Subsidy	Subsidy obtained	No	No	2,120,000.00	0.00	Pertinent
industry	Publicizing the		for engaging in					to
development of	Enterprises		specific sectors					revenue
Haidian Park	Which Will be		and industries
	Granted Special		encouraged and
	Funds for		supported by the
	Industry		state (lawfully
	Development in		obtained according
	Haidian Park in		to national
	the Second		policies)
	Half of 2016

— 387 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

				Did the
				subsidies
		Reason		have an				Pertinent
		for		effect on	Were the			to assets/
		issuing		profits/	subsidies	Amount incurred	Amount incurred	Pertinent
		the		losses of	special	in the current	in the previous	to
Subsidy items	Issuing body	subsidies	Nature	the year	subsidies	period	period	revenue
Subsidy for	Enterprises	Subsidy	Subsidy obtained	No	No	1,931,977.23	0.00	Pertinent
stabilizing	entitled to		for undertaking					to
employment	unemployment		the state’s					revenue
	insurance		function of
	support from		ensuring a certain
	Beijing		public utility or
	Municipal		supply of social
	Human		necessary products
	Resources and		or price control
	Social Security
	Bureau, Beijing
	Municipal
	Finance
	Bureau, Beijing
	Municipal
	Commission of
	Development
	and Reform,
	and Beijing
	Municipal
	Commission of
	Economy and
	Information
	Technology
Special funds for	Notice on	Subsidy	Subsidy obtained	No	No	500,000.00	0.00	Pertinent
industry	Publicizing the		for engaging in					to
development of	Enterprises		specific sectors					revenue
Haidian Park	Which Will Be		and industries
	Granted Special		encouraged and
	Funds for		supported by the
	Industry		state (lawfully
	Development in		obtained according
	Haidian Park in		to national
	the Second		policies)
	Half of 2016
Special funds for	Document Jin	Subsidy	Subsidy obtained	No	No	500,000.00	0.00	Pertinent
software industry	Jing Xin Ruan		for engaging in					to
development in	Jian No. 2		specific sectors					revenue
Tianjin City	[2013] of		and industries
	Tianjin		encouraged and
	Economic and		supported by the
	Information		state (lawfully
	Commission		obtained according
	and Tianjin		to national
	Finance Bureau		policies)

— 388 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

				Did the
				subsidies
		Reason		have an				Pertinent
		for		effect on	Were the			to assets/
		issuing		profits/	subsidies	Amount incurred	Amount incurred	Pertinent
		the		losses of	special	in the current	in the previous	to
Subsidy items	Issuing body	subsidies	Nature	the year	subsidies	period	period	revenue
Special funds for	Document Guan	Subsidy	Subsidy obtained	No	No	491,927.00	0.00	Pertinent
film & TV cultural	Wei Hui No. 9		for engaging in					to
industry	[2016] of the		specific sectors					revenue
development in	Management		and industries
2015	Committee of		encouraged and
	Hengdian		supported by the
	Chinese Film		state (lawfully
	Industrial Park		obtained according
	in Zhejiang		to national
			policies)
2015 Zhongguancun	Notice on the	Subsidy	Subsidy obtained	No	No	469,000.00	0.00	Pertinent
technological	Issuance of		for R&D,					to
innovation funds	Measures for		technical					revenue
(brand)	the		upgrading and
	Management of		reformation, etc.
	Special Funds
	for
	Technological
	Innovation
	Capacity
	Building in
	Zhongguancun
	National
	Independent
	Innovative
	Demonstration
	Zone
Water conservancy	Document	Reward	Subsidy obtained	No	No	302,095.05	0.00	Pertinent
funds	Dong Di Shui		for R&D,					to
	Fa No. 29		technical					revenue
	[2015]		upgrading and
			reformation, etc.
Subsidy for	Document Jing	Subsidy	Subsidy obtained	No	No	238,961.17	0.00	Pertinent
stabilizing	Ren She Jiu Fa		for undertaking					to
employment	No. 186 [2015]		the state’s					revenue
			function of
			ensuring a certain
			public utility or
			supply of social
			necessary products
			or price control

— 389 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

				Did the
				subsidies
		Reason		have an				Pertinent
		for		effect on	Were the			to assets/
		issuing		profits/	subsidies	Amount incurred	Amount incurred	Pertinent
		the		losses of	special	in the current	in the previous	to
Subsidy items	Issuing body	subsidies	Nature	the year	subsidies	period	period	revenue
Special funds for	Notice of	Subsidy	Subsidy obtained	No	No	210,000.00	0.00	Pertinent
content	Beijing		for engaging in					to
development of	Municipal		specific sectors					revenue
network	Bureau of		and industries
audio-visual	Press,		encouraged and
programs in 2016	Publication,		supported by the
	Radio, Film		state (lawfully
	and Television		obtained according
	on Issuance of		to national
	Special Funds		policies)
	for Content
	Development of
	Network
	Audio-visual
	Programs in
	2016 by State
	Administration
	of Press,
	Publication,
	Radio, Film
	and Television
Screenplay	Funding	Subsidy	Subsidy obtained	No	No	100,000.00	0.00	Pertinent
incubation project	agreement on		for engaging in					to
	screenplay		specific sectors					revenue
	incubation		and industries
	project (Ju Xie		encouraged and
	Zi No. 189		supported by the
	[2016])		state (lawfully
			obtained according
			to national
			policies)
Special funds for	Notice on	Reward	Subsidy obtained	No	No	35,300.00	0.00	Pertinent
reward of famous	application for		for R&D,					to
trademarks in	patent rewards		technical					revenue
Haidian District			upgrading and
			reformation, etc.
Government	Hai Fa Gai No.	Subsidy	Subsidy obtained	No	No	0.00	15,000,000.00	Pertinent
subsidies for	263 [2015]		for R&D,					to
cross-industry big			technical					revenue
data services based			upgrading and
on multimedia			reformation, etc.
development cloud
platform

— 390 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

				Did the
				subsidies
		Reason		have an				Pertinent
		for		effect on	Were the			to assets/
		issuing		profits/	subsidies	Amount incurred	Amount incurred	Pertinent
		the		losses of	special	in the current	in the previous	to
Subsidy items	Issuing body	subsidies	Nature	the year	subsidies	period	period	revenue
Major application	Zhong Ke Yuan	Subsidy	Subsidy obtained	No	No	0.00	465,000.00	Pertinent
demonstration	Fa No. 56		for R&D,					to
project of	[2014]		technical					revenue
Zhongguancun			upgrading and
Industrial			reformation, etc.
Technology
Alliance
“Ten Hundred	Zhong Ke Yuan	Subsidy	Subsidy obtained	No	No	0.00	500,000.00	Pertinent
Thousand” Project	Fa No. 56		for R&D,					to
of the Management	[2014]		technical					revenue
Committee of			upgrading and
Zhongguancun			reformation, etc.
Science and
Technology Park
2015 commercial	Interim	Subsidy	Subsidy obtained	No	No	0.00	2,314,000.00	Pertinent
circulation	Measures for		for meeting the					to
development project	the		investment					revenue
of Beijing	Management of		promotion policies
Municipal	Special Funds		or other
Commission of	for Commercial		supportive policies
Commerce	Circulation		of the local
	Development in		government
	Beijing
Special funds for	Hai Xing Gui	Subsidy	Subsidy obtained	No	No	0.00	2,940,000.00	Pertinent
key enterprises of	Fa No. 10		for meeting the					to
Zhongguancun	[2014]		investment					revenue
Haidian Park			promotion policies
Management			or other
Committee			supportive policies
			of the local
			government
Cultural and	Jing Cai Ke	Subsidy	Subsidy obtained	No	No	0.00	400,000.00	Pertinent
creative industry	Wen No. 5		for engaging in					to
subsidies of	[2013]		specific sectors					revenue
State-owned			and industries
Cultural Assets			encouraged and
Supervision and			supported by the
Administration			state (lawfully
Office of Beijing			obtained according
Municipality			to national
			policies)
Technological	Zhong Ke Yuan	Reward	Subsidy obtained	No	No	0.00	9,100.00	Pertinent
innovation award	Fa [2013]		for R&D,					to
(for patent) of			technical					revenue
Capital Intellectual			upgrading and
Property Services			reformation, etc.
Association

— 391 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

				Did the
				subsidies
		Reason		have an				Pertinent
		for		effect on	Were the			to assets/
		issuing		profits/	subsidies	Amount incurred	Amount incurred	Pertinent
		the		losses of	special	in the current	in the previous	to
Subsidy items	Issuing body	subsidies	Nature	the year	subsidies	period	period	revenue
Reward funds of	Measures for	Reward	Subsidy obtained	No	No	0.00	250,000.00	Pertinent
Beijing Municipal	the		for engaging in					to
Bureau of Press,	Management of		specific sectors					revenue
Publication, Radio,	Reward Funds		and industries
Film and Television	of Excellent		encouraged and
	Network		supported by the
	Audio-visual		state (lawfully
	Program and		obtained according
	Network		to national
	Service Entities		policies)
	in Beijing
Technical subsidies	Provisional	Subsidy	Subsidy obtained	No	No	0.00	100,000.00	Pertinent
from Tianjin	Regulations on		for R&D,					to
Technology	the		technical					revenue
Development	Management of		upgrading and
Bureau	the Use of		reformation, etc.
	Special Funds
	for Intellectual
	Property in
	Tianjin
Financial aids for	Cooperation	Subsidy	Subsidy obtained	No	No	0.00	100,668.52	Pertinent
Sino-Singapore	agreement with		for meeting the					to
Tianjin Eco-city	Sino-Singapore		investment					revenue
	Tianjin		promotion policies
	Eco-city		or other
	Management		supportive policies
	Committee		of the local
			government
Special funds for	Management	Subsidy	Subsidy obtained	No	No	0.00	22,764,910.00	Pertinent
film & TV cultural	Committee No.		for engaging in					to
industry	5, No. 11, No.		specific sectors					revenue
development (tax	12 and No. 19		and industries
return)	[2015]		encouraged and
			supported by the
			state (lawfully
			obtained according
			to national
			policies)
Water conservancy	Dong Di Shui	Reward	Subsidy obtained	No	No	0.00	143,900.00	Pertinent
funds of Dongyang	Fa No. 29		for meeting the					to
Municipal Local	[2015]		investment					revenue
Taxation Bureau			promotion policies
			or other
			supportive policies
			of the local
			government
Total	—	—	—	—	—	46,253,493.79	44,987,578.52	—

— 392 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

70. Non-operating expenses

Unit: RMB

			Amount stated as
	Amount incurred	Amount incurred	non-recurring
	in the current	in the previous	gains/losses in the
Items	period	period	current period
Total losses from disposal of
non-current assets	35,423,474.44	37,634,806.94	35,423,474.44
Including: Loss on disposal of fixed
assets	0.00	0.00	0.00
Loss on disposal of intangible
assets	35,423,474.44	37,634,806.94	35,423,474.44
Loss on debt restructuring	0.00	0.00	0.00
Loss on exchange of non-monetary
assets	0.00	0.00	0.00
External donations	0.00	2,000,000.00	0.00
Others	2,387,602.07	606,716.90	2,387,602.07
Total	37,811,076.51	40,241,523.84	37,811,076.51

71. Income tax expenses

(1) Detailed income tax expenses

Unit: RMB

	Amount incurred in	Amount incurred in
Items	the current period	the previous period
Income tax expenses of the current period	152,728,087.89	161,595,406.98
Deferred income tax expenses	-259,543,977.05	-304,543,010.45
Total	-106,815,889.16	-142,947,603.47

— 393 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (2) Adjustment process of accounting profit and income tax expenses

Unit: RMB

	Amount incurred in
Items	the current period
Total profits	-328,708,520.87
Income tax expenses calculated as per legal/applicable tax rate	-49,306,278.13
Influence of applying different tax rates to subsidiaries	-219,299,264.29
Influence of income tax adjustment in previous periods	0.00
Influence of non-taxable revenue	-125,039,578.71
Influence of nondeductible costs, expenses and losses	41,110,635.83
Influence of extra deduction allowed by tax law	-28,394,829.30
Influence of deductible losses of deferred income tax assets unrecognized
in previous periods	0.00
Influence of deductible temporary differences or deductible losses of
deferred income tax assets unrecognized in the current period	274,113,425.44
Income tax expenses	-106,815,889.16

72. Other consolidated revenue

See Note “VI. 37 Other Consolidated Revenue” for details.

73. Items of cash flow statement

• (1) Other cash received relating to operating activities

		Unit: RMB
	Amount incurred in	Amount incurred in
Items	the current period	the previous period
Current account	576,061,930.63	59,978,371.90
Government subsidies	67,853,493.85	44,987,578.52
Interest revenue	11,226,477.14	6,180,571.19
Others	17,930,476.12	2,138,538.22
Total	673,072,377.74	113,285,059.83

— 394 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (2) Other cash paid relating to operating activities

Unit: RMB

	Amount incurred in	Amount incurred in
Items	the current period	the previous period
Advertising production expenses	629,596,834.63	158,826,157.33
Expenses on profit-sharing among members	60,874,545.60	326,176,820.75
Expenses for logistics and after-sales service	450,863,628.97	201,344,230.95
Consulting service expenses	147,936,203.50	55,562,597.59
Office and conference expenses	30,555,210.68	38,420,439.67
Rental fees	21,545,275.35	33,266,759.18
Travelling expenses	25,343,467.55	15,221,393.33
Social engagement expenses	8,024,734.38	12,166,298.55
Transportation and vehicle expenses	9,633,540.91	5,585,450.29
Current account	462,853,912.81	12,720,519.01
Others	32,218,426.43	8,551,478.80
Total	1,879,445,780.81	867,842,145.45

(3) Other cash received relating to investing activities

		Unit: RMB
	Amount incurred in	Amount incurred in
Items	the current period	the previous period
Refund of advance payment of royalties	2,100,000.00	0.00
Matured financial products	60,000,000.00	0.00
Other investment funds received	60,000,000.00	0.00
Total	122,100,000.00

— 395 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

• (4) Other cash paid relating to investing activities

Unit: RMB

	Amount incurred in	Amount incurred in	Amount incurred in
Items	**the **	current period	the previous period
Purchase of financial products		620,000,000.00	60,000,000.00
Foreign borrowings		49,875,613.00	0.00
Ending monetary funds of LeTV Sports		0.00	4,533,291.83
Withheld and remitted individual income tax for
dividends to shareholders		0.00	25,200,000.00
Total		669,875,613.00	89,733,291.83
(5) Other cash received relating to fundraising	activities
			Unit: RMB
	Amount incurred in		Amount incurred in
Items	**the **	current period	the previous period
Personal income tax collected for exercise of
stock options		257,457,387.26	0.00
Deposit for bank acceptance bill		15,000,000.00	0.00
Discounted notes receivable within consolidation
scope		0.00	340,933,888.89
Investment funds of The Legend of Miyue		0.00	60,000,000.00
Total		272,457,387.26	400,933,888.89

— 396 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

• (6) Other cash paid relating to fundraising activities

		Unit: RMB
	Amount incurred in	Amount incurred in
Items	the current period	the previous period
Funds frozen under the “Onshore Guarantees for
Offshore Loans” approach	2,127,500,000.00	0.00
Matured bank acceptance bills	350,000,000.00	0.00
Personal income tax paid for exercise of stock
options	270,913,639.74	0.00
Stock issue expenses	36,150,943.32	0.00
Finance lease funds	35,046,039.64	27,185,078.74
Deposit for bank acceptance bill	26,200,000.00	0.00
Investor distribution funds	0.00	107,111,423.13
Total	2,845,810,622.70	134,296,501.87

74. Supplementary information for cash flow statement

• (1) Supplementary information for cash flow statement

			Unit: RMB
		Amount in the	Amount in the
Supplementary Information		current period	previous period
1.	Reconciliation of net profit to cash flows
	from operating activities:	—	—
	Net profit	-221,892,631.71	217,116,825.56
	Plus: Provision for assets impairment	351,968,232.15	120,153,303.15
	Depreciation of fixed assets, depletion of
	oil and gas assets, and depreciation of
	productive biological assets	209,272,104.39	113,574,965.71
	Amortization of intangible assets	2,071,436,289.12	1,526,123,746.11
	Amortization of long-term expenses to be
	amortized	678,802.12	943,669.21
	Loss on disposal of fixed assets, intangible
	assets and other long-term assets (“-” for
	gains)	35,423,474.44	37,634,806.94
	Loss on scrapping of fixed assets (“-” for
	gains)	0.00	0.00

— 397 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

		Amount in the	Amount in the
Supplementary Information		current period	previous period
	Loss on changes in fair value (“-” for
	gains)	0.00	0.00
	Financial expenses (“-” for gains)	550,138,357.41	284,322,482.32
	Investment loss (“-” for gains)	-36,637,102.64	-78,749,437.60
	Decrease in deferred income tax assets (“-”
	for increase)	-256,091,967.74	-311,032,872.18
	Increase in deferred income tax liabilities
	(“-” for decrease)	-3,452,009.31	6,489,861.73
	Decrease of inventory (“-” for increase)	167,064,614.56	-403,711,270.53
	Decrease in operating receivables (“-” for
	increase)	-4,806,681,102.21	-4,226,975,861.15
	Increase in operating payables (“-” for
	decrease)	734,982,836.75	3,555,649,118.10
	Others	135,729,333.71	34,162,539.09
	Net amount of cash flow from operating
	activities	-1,068,060,768.96	875,701,876.46
2.	Major investing and fundraising activities
	that do not involve cash receipts and
	payments:	—	—
	Convertible corporate bonds maturing
	within one year	0.00	0.00
	Fixed assets under finance lease	257,630,871.91	48,273,329.93
3.	Net changes in cash and cash equivalents:	—	—
	Ending balance of cash	1,469,207,975.01	2,714,778,115.14
	Less: Opening balance of cash	2,714,778,115.15	447,348,595.63
	Plus: Ending balance of cash equivalents	0.00	0.00
	Less: Opening balance of cash equivalents	0.00	0.00
	Net increase in cash and cash equivalents	-1,245,570,140.14	2,267,429,519.51

• (2) Net cash paid in the current period for acquisition of subsidiaries

None

• (3) Net cash received in the current period for disposal of subsidiaries

None

— 398 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

(4) Composition of cash and cash equivalents

			Unit: RMB
Items		Ending balance	Opening balance
I.	Cash	1,469,207,975.01	2,714,778,115.15
	Including: Cash on hand	424,576.15	189,596.70
	Bank deposit ready for payment any time	1,457,811,414.27	2,714,588,518.44
	Other monetary funds ready for payment
	any time	2,338,061.19	0.00
	Deposits with Central Bank for payment	0.00	0.00
	Deposits with banks and other financial
	institutions	0.00	0.00
	Placements with banks and other financial
	institutions	0.00	0.00
II.	Cash equivalents	0.00	0.00
	Including: Bond investments maturing
	within three months	0.00	0.00
III.	Ending balance of cash and cash
	equivalents	1,469,207,975.00	2,714,778,115.14
	Including: Cash and cash equivalents
	restrictedly used in the parent company or
	subsidiaries	0.00	0.00

75. Notes to items in the statement of changes in owners’ equity

Explain “other” adjustments to the ending balance of last year and amounts thereof:

1. This year there was no “other” adjustments to the ending balance of last year.

2. Capital reserve — others in the statement of changes in owners’ equity this year refers to: 1) the capital reserve increased because of the RMB91,326,151.94 of interest withdrawn for equity transaction for the loan voluntarily offered to the Company by Jia Yueting and Jia Yuefang; and 2) RMB221,773,450.28 of capital reserve increased because of the equity transfer of LeTV E-commerce (Beijing) Co., Ltd. this year.

3. Assets with restricted ownership or right of use

Unit: RMB

Ending book value Reason for restriction

Items E Monetary funds Monetary funds Monetary funds Monetary funds Total	nding book value Reason for restriction 55,565,202.02 Deposit for bank acceptance bill 2,127,500,000.00 Deposit for purchase of TCL’s equity 1,200,000.00 L/G deposit 24,307,102.45 Freeze of account 2,208,572,304.47 —

— 399 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Foreign currency monetary items

2. (1) Foreign currency monetary items

Unit: RMB

	Ending foreign		Ending balance of
Items	currency balance	Exchange rate	converted RMB
Monetary funds	—	—	30,886,868.72
Including: US dollar	1,951,269.82	6.9370	13,535,958.74
Hong Kong dollar	19,397,111.24	0.89451	17,350,909.98
Accounts receivable	—	—	85,706,635.00
Including: US dollar	12,355,000.00	6.9370	85,706,635.00
Hong Kong dollar	0.00	0.89451	0.00
Other receivables	38,151,397.27	34,472,859.77
Including: US dollar	57,270.00	6.9370	397,281.99
Hong Kong dollar	38,094,127.27	0.89451	34,075,577.78
Accounts payable	47,866,758.42	42,817,294.07
Including: US dollar	0.00	6.9370	0.00
Hong Kong dollar	47,866,758.42	0.89451	42,817,294.07
Other payables	2,831,278.29	15,788,545.37
Including: US dollar	2,193,787.43	6.9370	15,218,303.42
Hong Kong dollar	637,490.86	0.89451	570,241.95

• (2) Description of overseas business entities; for material overseas business entities, disclose their major business places overseas, recording currency and the selection criterion thereof; should there be any change in the recording currency, disclose the reason for such change.

• Applicable � Not Applicable

78. Hedging

Disclose by category hedging items and qualitative and quantitative information on relevant hedging tools and hedged risks:

79. Others

VIII. Change of consolidation scope

1. Merger of enterprises not under the same control

2. (1) Merger of enterprises not under the same control in the current period

None

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (2) Merger cost and goodwill

None

• (3) Identifiable assets and liabilities of the acquired party as at the date of acquisition

None

• (4) Gains or losses arising from re-measurement of the fair value of the equity held before the date of acquisition

Was there any transaction in which merger of enterprises is achieved by multiple transactions in stages and right of control is obtained during the reporting period

□Yes

• �No

• (5) Description of consideration for merger or identifiable assets and liabilities of the acquired party whose fair value cannot be appropriately determined as at the date of acquisition or the end of the period of merger

• (6) Other descriptions

• Merger of enterprises under the same control

• (1) Merger of enterprises under the same control in the current period

None

• (2) Merger cost

None

• (3) Book value of the assets and liabilities of the merged party on the date of merger

None

3. Counter purchase

Basic information about the transaction, basis for recognizing the transaction as counter purchase, whether the assets and liabilities reserved by the listed company constitute transactions and basis thereof, determination of merger cost, the amount of equity adjusted for equity transaction and calculation thereof:

None

— 401 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Disposal of subsidiaries

Was there any single disposal of equity investment in subsidiary that results in loss of control

• �Yes □No

— 402 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Unit: RMB			Amount of	other	consolidated	revenue which	is related to the	original equity	investment in	subsidiary and	stated as	investment	gains/losses	0.00
					Method of	determining the	fair value of	remaining	equity on the	date of loss of	control and	primary	assumption	—
								Gains or losses	arising from	re-measurement	of the fair value	of remaining	equity
									Fair value of	remaining	equity on the	date of loss of	control
									Book value of	remaining	equity on the	date of loss of	control	0.00
									Percentage of	remaining	equity on the	date of loss of	control	15.00%
	Difference	between the	disposal price	and the net	asset shares	held in the	subsidiary after	disposal of	equity	investment in	the consolidated	financial	statements	RMB222 million
										Basis for	determining the	time of loss of	control	Relevant changes	were registered	with the industry	and commerce	authority on	December 26th,	2016
												Time of loss of	control	December 26th,	2016
												Percentage of	equity disposal Way of disposal	15.00% Equity transfer
												Equity disposal	price	0.00
												Name of	subsidiary	LeTV	E-commerce	(Beijing) Co.,	Ltd.

— 403 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Other descriptions:

In 2015 the Company held 30% equity and 67% voting rights of LeTV E-commerce (Beijing) Co., Ltd. (hereinafter referred to as “E-commerce”), so E-commerce was included in the scope of the consolidated financial statements. In October 2016 the Company transferred 15% equity held by it in E-commerce to Lerong Holdings (Beijing) Co., Ltd., after which the Company held 15% equity in E-commerce. On December 24th, 2016, E-commerce held a general meeting and changed the articles of association that the Company directly or indirectly holds 5% equity originally, that is, exercises 67% rights, as follows: the resolution made by the general meeting regarding amendment to the articles of association and increase or decrease of registered capital and resolution regarding merger, split-off, dissolution or transformation of the Company should be approved by shareholders representing more than two-thirds of the voting rights and other matters should be approved by shareholders representing more than half of the voting rights. Therefore, the Company lost control over E-commerce. This year, the income statement and the cash flow statement of E-commerce were included in the consolidation scope of the consolidated financial statements. At the end of the period, the balance sheet was no longer included in the consolidation scope and the impact from the equity transfer on the consolidated financial statements was recognized as capital reserve.

Was there any disposal of equity investment in its subsidiary in stages through multiple transactions until loss of control in the current period

□Yes �No

1. Change in consolidation scope for other reasons

Explain change in consolidated scope for other reasons (e.g. new establishment or liquidation of subsidiaries) and relevant details:

• (1) Investment in Shenzhen LeTV Xingen M&A Fund Management Limited and Shenzhen LeTV M&A Fund Investment and Management Partnership (limited partnership)

In the current period, the Company’s subsidiary Beijing LeTV Streaming Media Advertising Co., Ltd. (hereinafter referred to as “Streaming Media”) invested RMB2,750,000 in Shenzhen LeTV Xingen M&A Fund Management Limited (hereinafter referred to as “Xingen M&A”) and held 55.00% of its equity. So this year Xingen M&A was included in the scope of the consolidated financial statements.

Business scope of Xingen M&A: entrusted management of private equity fund (no public placement or management thereof); entrusted asset management (no trust management, financial asset management, securities asset management, etc.); investment consultation.

The Company’s subsidiary Streaming Media and Xingen M&A jointly invested in Shenzhen LeTV Xingen M&A Fund Investment Management Partnership (limited partnership) (hereinafter referred to as “Xingen Partnership”). Streaming Media directly and indirectly held 23.08% equity in Xingen Partnership and is the posterior limited partner of Xingen Partnership, so Xingen Partnership was included in the scope of consolidated financial statements this year.

— 404 —

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FINANCIAL INFORMATION OF LESHI INTERNET

Business scope of Xingen Partnership: equity investment in unlisted enterprises, consultation on equity investment and listing (no securities investment, no public placement or management thereof); setup of businesses (subject to approval by relevant authorities); investment consulting, investment advisory and business management consulting (excluding restricted projects); The said business scope does not include projects prohibited by laws, administrative regulations and the State Council. Restricted projects shall be subject to approval by relevant authorities.

(2) New establishment of subsidiary Chongqing Letv Microcredit Co., Ltd.

In March 2016, the Company invested RMB300,000,000.00 in setting up a wholly-owned subsidiary Chongqing Letv Microcredit Co., Ltd. (hereinafter referred to as “Letv Microcredit”). As the Company holds 100.00% equity of Letv Microcredit, it was included in the scope of consolidated financial statements this year.

Business scope of Letv Microcredit: loans, bill discounting, asset transfer and other businesses approved by municipal finance office (various loan and bill discounting businesses can be conducted nationwide online). The said business activities within the business scope shall be conducted as per the requirements and term specified in the license file.

6. Others

• IX. Equity in other entities

• Equity in subsidiaries

• (1) Constitution of the enterprise group

	Main business			**Shareholding **	ratio	Method of
Name of subsidiary	place	Registered in	Business nature	Direct	Indirect	obtainment
LeTV Information Technology	Tianjin	Tianjin	IT	100.00%		Investment
(Tianjin) Co., Ltd.
Beijing LeTV Streaming	Beijing	Beijing	Advertising	100.00%		Investment
Media Advertising Co., Ltd.
Letv Information Technology	Hong Kong	Hong Kong	IT	100.00%		Investment
(Hong Kong) Co., Ltd.
LeTV Information Technology	Shanghai	Shanghai	IT	100.00%		Investment
(Shanghai) Co., Ltd.
Leshi Zhixin Electronic	Tianjin	Tianjin	Production and sales	58.55%		Investment
Technology (Tianjin)			of products
Limited
LeTV Cultural Development	Beijing	Beijing	Literature & art	51.00%		Investment
(Beijing) Co., Ltd.			exchange, advertising
LeTV New Media Culture	Tianjin	Tianjin	IT	100.00%		Procurement of
(Tianjin) Co., Ltd.						assets through
						share issue

— 405 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

	Main business			**Shareholding **	ratio	Method of
Name of subsidiary	place	Registered in	Business nature	Direct	Indirect	obtainment
Dongyang LeTV Flower Film	Dongyang	Dongyang	Film & TV culture	100.00%		Procurement of
& TV Co., Ltd.						assets through
						share issue
LeCloud Computing Co., Ltd.	Beijing	Beijing	Data processing and	50.00%		Investment
			technical services
Khorgos Letv New Generation	Xinjiang	Xinjiang	Membership business	100.00%		Investment
Culture Media Co., Ltd.
Chongqing Letv Microcredit	Chongqing	Chongqing	Loan business	100.00%		Investment
Co., Ltd.
Letv Yuanchuang (Beijing)	Beijing	Beijing	Art & culture	100.00%		Investment
Culture Media Co., Ltd.			exchanges
LeTV Fortune (Beijing)	Beijing	Beijing	Internet finance	100.00%		Investment
Information Technology Co.,
Ltd.
Lexiang Holdings Co., Ltd.	Hong Kong	Hong Kong	—	100.00%		Investment
LeTV E-commerce (Beijing)	Beijing	Beijing	Retail business	30.00%		Investment
Co., Ltd.

Note: LeTV E-commerce (Beijing) Co., Ltd. was no longer included in the scope of the consolidated financial statements since December 31st, 2016.

• (2) Important non-wholly-owned subsidiaries

Unit: RMB

Dividends Gains/losses announced to attributable to be assigned to Shareholding minority minority Ending ratio of shareholders shareholders balance of minority in the current in the current minority Name of subsidiary shareholders period period interests Leshi Zhixin Electronic Technology (Tianjin) Limited 41.45% 263,479,724.25 0.00 331,594,669.77 LeTV Cultural Development (Beijing) Co., Ltd. 49.00% -142,049.10 0.00 1,607,641.72 LeCloud Computing Co., Ltd. 50.00% -3,763,475.07 0.00 577,366,424.45

— 406 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Unit: RMB	Ending balance Opening balance	Name of Non-current Current Non-current Non-current Current Non-current	subsidiary Current assets assets Total assets liabilities liabilities Total liabilities Current assets assets Total assets liabilities liabilities Total liabilities	Leshi Zhixin	Electronic	Technology	(Tianjin)	Limited 6,624,597,035.14 4,256,103,156.56 10,880,700,191.70 6,826,241,523.38 11,680,687,332.27 3,600,372,604.10 1,217,613,893.81 4,817,986,497.91 5,020,453,063.23 5,020,453,063.23	LeTV Cultural	Development	(Beijing)	Co., Ltd. 3,240,086.75 40,814.72 3,280,901.47 0.00 0.00 3,512,238.77 58,558.82 3,570,797.59 0.00 0.00	LeCloud	Computing	Co., Ltd. 946,004,960.08 1,267,010,256.56 2,213,015,216.64 794,706,706.63 816,306,706.63 144,008,903.43 771,204,370.19 915,213,273.62 624,398,119.55 624,398,119.55	Unit: RMB	Amount incurred in the current period Amount incurred in the previous period	Total Cash flow Total Cash flow	Operating consolidated from operating Operating consolidated from operating	Name of subsidiary revenue Net profit revenue activities revenue Net profit revenue activities	Leshi Zhixin Electronic Technology	(Tianjin) Limited 16,081,572,929.21 -635,656,753.31 -635,656,753.31 -2,502,406,588.16 8,692,826,932.77 -730,518,771.38 -730,518,771.38 1,159,631,511.06	LeTV Cultural Development (Beijing)	Co., Ltd. 0.00 -289,896.12 -289,896.12 -242,140.52 0.00 -1,030,661.86 -1,030,661.86 121,643.98	LeCloud Computing Co., Ltd. 1,201,397,654.21 -17,619,903.34 -17,619,903.34 -471,310,895.83 562,394,995.64 -100,282,410.13 -100,282,410.13 -14,577,263.48

— 407 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Other descriptions:

• (4) Important limitations on using the assets of and paying off the liabilities of the enterprise group

None

• (5) Financial support or other support for structured bodies included in the scope of consolidated financial statements

None

1. Control over subsidiaries’ transactions despite change in owners’ equity in subsidiaries

2. (1) Descriptions of change in owners’ equity in subsidiaries

In 2016 LeCloud Computing Co., Ltd. (hereinafter referred to as “LeCloud Computing”) introduced investor Chongqing Strategic Emerging Industry LeCloud Special Equity Investment Fund Joint Venture (limited partnership). After amendments to the articles of association and registration of change with the industry and commerce authority, the Company’s shareholding ratio in LeCloud Computing changed from 60% to 50%. This year the consolidated financial statements were prepared in segments according to the changed shareholding ratio.

• (2) Impact of transactions on minority interests and equity attributable to owners of the parent company

None

— 408 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Equity in joint ventures or associated enterprises

2. (1) Important joint ventures or associated enterprises

						Accounting for
						investments in
Name of joint ventures						joint ventures or
or associated	Main business			Shareholding ratio		associated
enterprises	place	Registered in	Business nature	Direct	Indirect	enterprises
TCL Multimedia	Hong Kong	Hong Kong	Television sales	20.10%		Equity method
Technology Holdings
Limited
Beijing Zhiyi	Beijing	Beijing	Technological	20.00%		Equity method
Information			development
Technology Co., Ltd.

• (2) Main financial information about important joint ventures

None

• (3) Main financial information about important associated enterprises

Unit: RMB

	Ending balance/amount	Ending balance/amount	Opening balance/amount	Opening balance/amount
	**incurred in the **	current period	**incurred in the **	previous period
	TCL	Beijing Zhiyi	TCL	Beijing Zhiyi
	Multimedia	Information	Multimedia	Information
	Technology	Technology	Technology	Technology
	Holdings Limited	Co., Ltd.	Holdings Limited	Co., Ltd.
Current assets	15,971,349,112.00	252,633,000.01	13,100,378,842.00	420,492,772.07
Non-current assets	2,844,701,947.00	35,726,818.91	2,990,477,642.00	19,861,126.54
Total assets	18,816,051,059.00	288,359,818.92	16,090,856,484.00	440,353,898.61
Current liabilities	11,876,773,175.00	235,888,765.65	11,313,117,255.00	389,054,864.50
Non-current
liabilities	432,394,484.00	1,073,913.00	426,745,172.00	1,073,009.00
Total liabilities	12,309,167,659.00	236,962,678.65	11,739,862,427.00	390,127,873.50
Minority interests	103,900,110.00	0.00	112,143,973.00	0.00
Equity attributable
to shareholders
of the parent
company	6,402,983,290.00	51,397,140.27	4,238,850,084.00	50,226,025.11
Net assets share
calculated as per
shareholding
ratio	1,286,999,641.29	10,279,428.05		10,045,254.04

— 409 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

	Ending balance/amount	Ending balance/amount	Opening balance/amount	Opening balance/amount
	**incurred in the **	current period	**incurred in the **	previous period
	TCL	Beijing Zhiyi	TCL	Beijing Zhiyi
	Multimedia	Information	Multimedia	Information
	Technology	Technology	Technology	Technology
	Holdings Limited	Co., Ltd.	Holdings Limited	Co., Ltd.
Adjustments	4,576,588.61	0.00		0.00
- Goodwill	0.00	0.00		0.00
- Unrealized profits
of internal
transactions	4,576,588.61	0.00		0.00
- Others	0.00	0.00		0.00
Book value of
equity investment
in associated
enterprises	2,060,022,687.54	10,279,428.05		10,045,254.04
Fair value of equity
investment in
associated
enterprises
through public
offer	1,201,391,781.97	0.00		0.00
Operating revenue	33,727,059,433.00	312,038,213.36	34,989,487,690.00	31,788,074.73
Net profit	181,664,805.00	989,100.57	15,340,396.00	226,270.22
Net profit of
discontinued
operations	0.00	0.00	0.00	0.00
Other consolidated
revenue	-305,219,241.00	0.00	-280,382,723.00	0.00
Total consolidated
revenue	-123,554,436.00	989,100.57	-265,042,327.00	226,270.22
Dividends from
associated
enterprises this
year	0.00	0.00		0.00

X. Risks relevant to financial instruments

Major financial instruments of the Company include receivables, available-for-sale financial assets, loans, payables, etc. See Note VI for details about the financial instruments. The following are risks relevant to these financial instruments and the risk management measures taken by the Group for reducing these risks: The management of the Group managed and supervised these risk exposures to keep the said risks under control within the limits. Various risk management goals and policies:

— 410 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

The Group’s risk management goal is to achieve appropriate balance between risks and return, minimize the adverse effect of risks on the operating results of the Group to the lowest level and maximize the interests of shareholders and other equity investors. To achieve the said goal, the Group formulated a basic risk management strategy of defining and analyzing various risks faced by the Group, setting an appropriate bottom line of risk tolerance to carry out risk management and conducting timely and reliable supervision on the risks to keep them under control within the limits.

1. Foreign currency risk

Foreign exchange risk refers to the risk brought by foreign exchange rate fluctuations which may affect the Group’s financial results and cash flow. Foreign exchange risk borne by the Group is mainly related to monetary capital held and purchase & sale business settled in USD. The Group faces the risk of a fluctuating exchange rate between USD and the Group’s functional currency.

The Group paid close attention to the influence of exchange rate fluctuations on the Group.

2. Credit risk

As at December 31st, 2016, the largest credit risk exposure that may incur financial loss to the Company came from the other party’s failure to perform its obligations under the contract (leading to a loss of financial assets of the Group) and the financial guarantee provided by the Group, including:

Book value of financial assets recognized in the consolidated balance sheet; for financial instruments measured at fair value, their book value reflects their risk exposure, but not their largest risk exposure, which will change with their future fair value.

To reduce credit risk, the Group established an ad hoc department for credit line determination and credit approval and carried out other monitoring procedures to make sure necessary measures are taken to recover overdue debts. Besides, the Group checked recovery of every single receivable on each balance sheet date to make sure abundant provision had been withdrawn for irrecoverable items. Therefore, the management of the Group held that the credit risk of the Group had been reduced considerably.

The Group’s credit risk related to working capital was relatively low as its working capital was deposited in banks of high credit rating.

The Group had taken necessary measures to make sure all customers have a good credit record. Except for the top five accounts receivable, the Group had no other significant credit concentration risk.

3. Liquidity risk

Liquidity risk is the risk that the Group cannot perform its financial obligations on the maturity date. To keep such risk under control, the Group made sure there was enough working capital to repay mature debts so as to avoid unacceptable losses or reputation damage. The Group analyzed liability

— 411 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

structure and maturity on a regular basis to ensure capital adequacy. The management of the Group monitored the use of bank loans and ensured strict compliance with the loan agreements. Meanwhile, the Group negotiated with financial institutions on financing to ensure enough credit line was extended as a way to reduce liquidity risk.

The Group’s funds raised were mainly from bond issuance, long-term loans and volunteer loans from Jia Yueting and Jia Yuefang. As at December 31st, 2016, the Group’s bonds issued logged RMB1,930,000,000.00, long-term loans logged RMB3,024,445,808.89 and voluntary loans from Jia Yueting and Jia Yuefang logged RMB436,336,372.62; loans from connected parties could be used gratuitously for long term and were less risky.

• XI. Disclosure of fair value

• Ending fair value of assets and liabilities measured at fair value

					Unit: RMB
			**Ending fair **	value
	Level 1		Level 2	Level 3
	fair value	fair value		fair value
Items	measurement	measurement		measurement	Total
I. Recurring fair value
measurement	—		—	—	—
(II) Available-for-sale
financial assets	66,395,362.55		0.00	0.00	66,395,362.55
Total amount of liabilities
through recurring fair value
measurement	66,395,362.55		0.00	0.00	66,395,362.55
II. Non-recurring fair value
measurement	—		—	—	—

1. Basis for determining the market price of recurring and non-recurring level 1 fair value measurements

2. Qualitative and quantitative information of evaluation techniques and important parameters for recurring and non-recurring level 2 fair value measurements

3. Qualitative and quantitative information of evaluation techniques and important parameters for recurring and non-recurring level 3 fair value measurements

4. Adjustments to opening and ending book value and sensitivity analysis on unobservable parameters for recurring level 3 fair value measurements

5. In the case of shifts between levels of recurring fair value measurements in the current period, the reason for such shifts and the basis for determining the time of shift

— 412 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Changes in evaluation techniques in the current period and the reason for such changes

2. Fair value of financial assets and financial liabilities not measured at fair value

3. Others

XII. Connected parties and connected transactions

1. The Company’s parent company

The ultimate controller of the Company is Jia Yueting.

2. The Company’s subsidiaries

See Note “VIII. 1. (1) Constitution of the Enterprise Group” for details about the Company’s subsidiaries.

3. The Company’s joint ventures and associated enterprises

See Note “VIII. 3. (1) Important Associated Enterprises” for details about important joint ventures or associated enterprises of the Company.

Information on other joint ventures or associated enterprises with balance formed through its connected transactions with the Company in the current and previous periods is as follows:

Name of joint venture or associated enterprise

Beijing Zhiyi Information Technology Co., Ltd. TCL Multimedia Technology Holdings Limited

Relationship with the Company Associated enterprise Associated enterprise

4. Information about other connected parties

Name of other connected party

Le Corporation Limited Le Technology Incorporated Le Eco Russia and Eastern Europe(Singapore)Pte.Ltd.

Le Ecosystem Technology India Private Limited Beijing StatusWin Lottery Operations Technology Ltd. Beijing Oriental Carring Information Technology Co., Ltd. Beijing Hongcheng Xintai Real Estate Co., Ltd.

Relation between other connected party and the Company Under the control of the same controller Under the control of the same controller Under the control of the same controller

Under the control of the same controller Under the control of the same controller Under the control of the same controller Under the control of the same controller

— 413 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Name of other connected party

Beijing Jinyi Asset Management Center (limited partnership) Beijing Leyang Entertainment Co., Ltd. Beijing Wangjiu Electronic Commerce Co., Ltd. Beijing Yidao Travel Agency Co., Ltd. Beijing Edooon Sport Network Technology Co., Ltd.

Faledi (Beijing) Network Technology Co., Ltd. Olive Tree Asset Management (Jiaxing) Co., Ltd. Khorgos Le Vision Pictures Co., Ltd. Lefeng Holdings (Beijing) Co., Ltd. Leguo Culture Media (Beijing) Co., Ltd. Leka Inter Entertainment (Beijing) Information Technology Co., Ltd.

Leka Automobile Intelligent Technology (Beijing) Co., Ltd. Lele Innovative Intelligent Technology (Beijing) Co., Ltd. Lepa Marketing Services (Beijing) Co., Ltd. LeTV Chuangjing Technology (Beijing) Co., Ltd. LeTV E-commerce (Beijing) Co., Ltd. LeTV Feige Technology (Tianjin) Co., Ltd. LeTV Haiyun Culture Media (Beijing) Co., Ltd. LeTV Interconnection Technology (Beijing) Co., Ltd. LeTV Inter Entertainment Technology Co., Ltd. LeTV Holdings (Beijing) Co., Ltd. LeTV Supply Chain Services Financial Technology (Beijing) Co., Ltd. LeTV Brand Marketing Planning (Beijing) Co., Ltd. LeTV Mobile E-commerce (Beijing) Co., Ltd. LeTV Sports Culture Development (Beijing) Co., Ltd. LeTV Communications (Beijing) Information Technology Co., Ltd. LeTV Investment Management (Beijing) Co., Ltd. LeTV Virtual Reality Technology (Beijing) Co., Ltd. LeTV Mobile Intelligent Information Technology (Beijing) Co., Ltd.

Relation between other connected party and the Company Under the control of the same controller

Under the control of the same controller Under the control of the same controller Under the control of the same controller Under the control of the same controller

Under the control of the same controller Under the control of the same controller Under the control of the same controller Under the control of the same controller Under the control of the same controller Under the control of the same controller

Under the control of the same controller

Under the control of the same controller

Under the control of the same controller Under the control of the same controller Under the control of the same controller Under the control of the same controller Under the control of the same controller Under the control of the same controller

Under the control of the same controller Under the control of the same controller Under the control of the same controller

Under the control of the same controller

Under the control of the same controller Under the control of the same controller

Under the control of the same controller

Under the control of the same controller

Under the control of the same controller

Under the control of the same controller

— 414 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Name of other connected party

LeTV Music Culture Development (Beijing) Co., Ltd. Le Vision Pictures (Beijing) Co., Ltd. Le Vision Pictures (Tianjin) Co., Ltd. LeTV Games Technology (Beijing) Co., Ltd. LeTV Smart Terminal Science & Technology Co., Ltd.

LeTV Assets Management (Qingdao) Co., Ltd. Lexiang Shijie (Beijing) Information Technology Co., Ltd. Lexin (Beijing) Network Technology Co., Ltd. Leyi Interconnection Intelligent Technology (Beijing) Co., Ltd. Leying Network Information (Tianjin) Co., Ltd. Lingpai Lexiang Network Information (Beijing) Co., Ltd. Ningbo Meishan Bonded Port Area Hyacinth Asset Management Co., Ltd. Sunflower Asset Management (Jiaxing) Co., Ltd. Yulong Computer Telecommunication Scientific (Shenzhen) Co., Ltd.

Zhixing Weidao (Beijing) Information Technology Co., Ltd.

Chongqing LeTV Commercial Factoring Co., Ltd. Chongqing LeTV Sports Industry Development Co., Ltd. Le Wish Ltd. LeREE, Ltd.Co. LeTV Holdings (Hong Kong) Co., Ltd. LeTV Automobile (Beijing) Co., Ltd. LeTV Commercial Technology (Beijing) Co., Ltd.

Lesifang Culture Media (Beijing) Co., Ltd. Lexi Culture Media (Beijing) Co., Ltd. Zhejiang Tianle Micro-electronics Technology Corporation Limited Shanxi Xibeier Real Estate Co., Ltd. Beijing Xbell Communication Technology Co., Ltd.

Shenzhen LeTV Xingen Investment Partnership (limited partnership) Cymbidium Yushu (Beijing) Technology Co., Ltd.

Relation between other connected party and the Company Under the control of the same controller

Under the control of the same controller Under the control of the same controller Under the control of the same controller Under the control of the same controller

Under the control of the same controller Under the control of the same controller

Under the control of the same controller Under the control of the same controller

Under the control of the same controller Under the control of the same controller

Under the control of the same controller

Under the control of the same controller Under the control of the same controller

Under the control of the same controller

Under the control of the same controller Under the control of the same controller

Under the control of the same controller Under the control of the same controller Under the control of the same controller Under the control of the same controller Under the control of the same controller

Under the control of the same controller Under the control of the same controller Under the control of the same controller

Under the control of the same controller Under the control of the same controller

Under the control of the same controller

Other connected party

— 415 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Name of other connected party

TCL Overseas Electronic (Huizhou) Co., Ltd. TCL Technology Electronics (Huizhou) Co., Ltd. TCL King Electrical Appliances (Huizhou) Co., Ltd.

Relation between other connected party and the Company Other connected party Other connected party Other connected party

5. Connected transactions

• (1) Purchase and sale of commodities, and provision and acceptance of labor service

Commodities purchased/labor services accepted

Unit: RMB

		Amount		Whether the	Amount
	Content of	incurred in	Approved	transaction	incurred in
	connected	the current	transaction	limit is	the previous
Connected party	transaction	period	limit	exceeded	period
TCL Overseas Electronic	Goods purchase	1,266,305,496.90			0.00
(Huizhou) Co., Ltd.
Beijing Oriental Carring	Profit-sharing	252,003,296.00			0.00
Information Technology	among members
Co., Ltd.
Beijing Leyang Entertainment	Copyright	20,937,548.74			0.00
Co., Ltd.	purchase
Beijing Wangjiu Electronic	Goods purchase	7,720,290.56			13,261,938.80
Commerce Co., Ltd.
Beijing Yidao Travel Agency	Goods purchase	248,900.00			0.00
Co., Ltd.
Khorgos Le Vision Pictures	Copyright	212,000,000.00			0.00
Co., Ltd.	purchase
Leguo Culture Media	Copyright	3,660,000.00			44,080.00
(Beijing) Co., Ltd.	purchase
Leka Automobile Intelligent	Goods purchase	15,761,023.06			0.00
Technology (Beijing) Co.,
Ltd.
Lepa Marketing Services	Goods purchase	34,046,324.00			0.00
(Beijing) Co., Ltd.
LeTV Chuangjing Technology	Goods purchase	3,513,072.82			0.00
(Beijing) Co., Ltd.
LeTV Feige Technology	Goods purchase	6,781,087.30			2,724,677.08
(Tianjin) Co., Ltd.
LeTV Inter Entertainment	Goods purchase	2,287,650.00			0.00
Technology Co., Ltd.

— 416 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		Amount		Whether the	Amount
	Content of	incurred in	Approved	transaction	incurred in
	connected	the current	transaction	limit is	the previous
Connected party	transaction	period	limit	exceeded	period
LeTV Mobile E-commerce	Goods purchase	3,139,197,585.38		1,772,359,969.10
(Beijing) Co., Ltd.
LeTV Sports Culture	Advertising	388,669,274.91		289,871,844.62
Development (Beijing) Co.,	profit-sharing,
Ltd.	profit-sharing
	among members
	and goods
	purchase
LeTV Virtual Reality	Goods purchase	1,790,639.96			0.00
Technology (Beijing) Co.,
Ltd.
LeTV Mobile Intelligent	Profit-sharing	1,370,453,993.27		346,173,254.00
Information Technology	among members
(Beijing) Co., Ltd.	and goods
	purchase
LeTV Music Culture	Goods purchase	1,518,480.06			0.00
Development (Beijing) Co.,
Ltd.
Le Vision Pictures (Beijing)	Copyright	271,063,252.44		257,999,455.98
Co., Ltd.	purchase and
	advertising
LeTV Smart Terminal Science	Goods purchase	317,831,502.21			0.00
& Technology Co., Ltd.
Lexiang Shijie (Beijing)	Goods purchase	3,258,113.00			0.00
Information Technology
Co., Ltd.
Lexin (Beijing) Network	Service charge	6,289.50			0.00
Technology Co., Ltd.
Leyi Interconnection	Goods purchase	21,743,935.70			27,171,442.40
Intelligent Technology
(Beijing) Co., Ltd.
Leying Network Information	Goods purchase	214,398.28			0.00
(Tianjin) Co., Ltd.
Xiyue Animation (Hangzhou)	Goods purchase	150,000.00			0.00
Co., Ltd.
Yulong Computer	Goods purchase	146,308,919.85			0.00
Telecommunication	and
Scientific (Shenzhen) Co.,	profit-sharing
Ltd.	among members
Chongqing LeTV Commercial	Interest expenses	826,111.25			0.00
Factoring Co., Ltd.

— 417 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		Amount		Whether the	Amount
	Content of	incurred in	Approved	transaction	incurred in
	connected	the current	transaction	limit is	the previous
Connected party	transaction	period	limit	exceeded	period
Olive Tree Asset Management	Interest expenses	9,062,142.14			0.00
(Jiaxing) Co., Ltd.
Sunflower Asset Management	Interest expenses	839,983.33			0.00
(Jiaxing) Co., Ltd.
Cymbidium Yushu (Beijing)	Copyright	0.00			134,111.40
Technology Co., Ltd.	purchase
Le Vision Pictures (Tianjin)	Copyright	0.00			500,000.00
Co., Ltd.	purchase and
	advertising

Commodities sold/labor services provided

Unit: RMB

	Content of	Amount incurred	Amount incurred
	connected	in the current	in the previous
Connected party	transaction	period	period
Beijing Hongcheng Xintai Real Estate	Interest revenue	1,917,930.98	0.00
Co., Ltd.
Beijing Jinyi Asset Management	Interest income	2,024,999.63	0.00
Center (limited partnership)
Beijing Wangjiu Electronic Commerce	CDN services and	2,778,212.87	17,101,166.93
Co., Ltd.	interest income
Beijing Yidao Travel Agency Co., Ltd.	Sale of goods	80,000,000.00	0.00
Beijing Edooon Sport Network	CDN services	208,309.12	0.00
Technology Co., Ltd.
Beijing Zhiyi Information Technology	Sale of goods and	0.00	159,739,233.76
Co., Ltd.	copyright
Faledi (Beijing) Network Technology	Advertising	30,893,684.90	0.00
Co., Ltd.	business and CDN
	services
Lefeng Holdings (Beijing) Co., Ltd.	Interest income	1,137,221.53	0.00
Leka Inter Entertainment (Beijing)	Interest income	1,674,999.63	0.00
Information Technology Co., Ltd.
Leka Automobile Intelligent	CDN services	5,974,257.08	21,875,586.65
Technology (Beijing) Co., Ltd.
Lele Innovative Intelligent Technology	CDN services	1,784,742.60	0.00
(Beijing) Co., Ltd.
Lepa Marketing Services (Beijing)	Sale of goods and	7,086,534,298.98	0.00
Co., Ltd.	membership

— 418 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

	Content of	Amount incurred	Amount incurred
	connected	in the current	in the previous
Connected party	transaction	period	period
LeTV Chuangjing Technology	CDN services and	518,793.32	0.00
(Beijing) Co., Ltd.	sale of goods
LeTV Haiyun Culture Media (Beijing)	Interest income	2,024,999.63	0.00
Co., Ltd.
LeTV Interconnection Technology	Interest income	2,068,166.31	0.00
(Beijing) Co., Ltd.
LeTV Inter Entertainment Technology	Other income and	43,855,516.39	0.00
Co., Ltd.	CDN services
LeTV Holdings (Beijing) Co., Ltd.	Sale of goods and	262,847,690.70	3,513,959.16
	CDN services
LeTV Supply Chain Services	Interest income	75,000.00	0.00
Financial Technology (Beijing) Co.,
Ltd.
LeTV Brand Marketing Planning	Planning services	3,500,000.00	0.00
(Beijing) Co., Ltd.
LeTV Mobile E-commerce (Beijing)	Revenue from	451,145.00	15,437,914.62
Co., Ltd.	royalties
LeTV Sports Culture Development	Revenue from	328,190,894.74	278,776,781.53
(Beijing) Co., Ltd.	advertising and
	technical services
LeTV Communications (Beijing)	Interest income	166,666.55	0.00
Information Technology Co., Ltd.
LeTV Investment Management	Interest income	2,068,166.31	0.00
(Beijing) Co., Ltd.
LeTV Virtual Reality Technology	Sale of goods	460,160.00	0.00
(Beijing) Co., Ltd.
LeTV Mobile Intelligent Information	Sale of goods and	1,593,756,718.41	971,027,691.44
Technology (Beijing) Co., Ltd.	membership fee,
	advertising fee and
	royalties
LeTV Music Culture Development	Royalties	2,153,116.03	0.00
(Beijing) Co., Ltd.
Le Vision Pictures (Beijing) Co., Ltd.	Sale of goods and	2,103,595.86	15,898,700.00
	membership
Le Vision Pictures (Tianjin) Co., Ltd.	Sale of	66,500.00	0.00
	membership
LeTV Games Technology (Beijing)	Sale of	925.00	0.00
Co., Ltd.	membership
LeTV Smart Terminal Science &	Sale of	2,165,332,562.00	0.00
Technology Co., Ltd.	membership

— 419 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		Content of	Amount incurred	Amount incurred	Amount incurred
		connected	in the current	in the previous
Connected party		transaction	period		period
LeTV Assets Management (Qingdao)		Sale of	3,598.00		0.00
Co., Ltd.		membership
Lexiang Shijie (Beijing) Information		Interest income	1,278,409.11		0.00
Technology Co., Ltd.
Lexin (Beijing) Network Technology		CDN services,	71,923,256.43		0.00
Co., Ltd.		advertising
		business and
		interest income
Leyi Interconnection Intelligent		CDN services	368,825.95		20,353.00
Technology (Beijing) Co., Ltd.
Leying Network Information (Tianjin)		Sale of	8,734.60		54,984.64
Co., Ltd.		membership
Lingpai Lexiang Network Information		Interest income	2,116,666.29		0.00
(Beijing) Co., Ltd.
Ningbo Meishan Bonded Port Area		Interest income	305,555.68		0.00
Hyacinth Asset Management Co.,
Ltd.
Yulong Computer Telecommunication		Advertising	60,917,805.00		0.00
Scientific (Shenzhen) Co., Ltd.		business and sale
		of membership
Zhixing Weidao (Beijing) Information		Advertising	7,805,702.69		0.00
Technology Co., Ltd.		business and
		interest income
Chongqing LeTV Commercial		Interest income	1,679,999.67		0.00
Factoring Co., Ltd.
Chongqing LeTV Sports Industry		Sale of	7,581.00		0.00
Development Co., Ltd.		membership
Olive Tree Asset Management		Interest income	1,614,199.65		0.00
(Jiaxing) Co., Ltd.
LeREE, Ltd.Co.		Sale of goods	7,022,846.54		0.00
Le Ecosystem Technology India		Sale of goods	5,202,842.95		0.00
Private Limited
Le Wish Ltd		Sale of copyright	0.00	80,228,428.00
(2) Entrusted management	with connected		parties/contracting	and	entrusted
management/outsourcing

None

— 420 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

(3) Rental with connected parties

The Company as the lessor:

Unit: RMB

Rental income Rental income Type of leasing recognized in the recognized in the Name of Lessee assets current period previous period LeTV Sports Culture Development Equipment leasing 1,995,109.30 1,511,972.54 (Beijing) Co., Ltd.

The Company as the lessee:

Unit: RMB

Rental fee Rental fee Type of leasing recognized in the recognized in the Name of Lessor assets current period previous period Beijing Hongcheng Xintai Real Estate House leasing 10,168,907.33 12,930,073.50 Co., Ltd. Shanxi Xibeier Real Estate Co., Ltd. House leasing 157,956.77 8,303.76

(4) Guarantee with connected parties

The Company as the guaranteed party

Unit: RMB

				Whether the
	Guaranteed	Commencement	Maturity	guarantee has
Guarantor	amount	date	date	been fulfilled
Jia Yueting, LeTV Information	60,000,000.00	February 5th, 2016	February 4th, 2017	No
Technology (Tianjin) Co.,
Ltd.
Jia Yueting, LeTV Information	183,800,000.00	March 31st, 2016	March 30th, 2017	No
Technology (Tianjin) Co.,
Ltd.
Jia Yueting, LeTV Information	60,000,000.00	May 27th, 2016	May 26th, 2017	No
Technology (Tianjin) Co.,
Ltd.
Jia Yueting, LeTV Information	100,000,000.00	May 31st, 2016	May 31st, 2017	No
Technology (Tianjin) Co.,
Ltd.
Jia Yueting, LeTV Information	116,200,000.00	June 3rd, 2016	June 2nd, 2017	No
Technology (Tianjin) Co.,
Ltd.
LeTV Information Technology	150,000,000.00	June 8th, 2016	June 7th, 2017	No
(Tianjin) Co., Ltd.
LeTV Holdings (Beijing) Co.,	50,000,000.00	June 23rd, 2016	June 22nd, 2017	No
Ltd., Jia Yueting, Jia Yuemin

— 421 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

					Whether the
		Guaranteed	Commencement	Maturity	guarantee has
Guarantor		amount	date	date	been fulfilled
LeTV Information Technology		110,000,000.00	July 8th, 2016	June 7th, 2017	No
(Tianjin) Co., Ltd.
LeTV Information Technology		90,000,000.00	August 18th, 2016	August 17th, 2017	No
(Tianjin) Co., Ltd.
Jia Yueting		200,000,000.00	September 29th, 2016	September 28th, 2017	No
Jia Yueting		23,486,000.00	August 10th, 2016	August 9th, 2017	No
Jia Yueting		300,000,000.00	September 12th, 2016	June 12th, 2017	No
Jia Yueting, Gan Wei	1,000,000,000.00		August 26th, 2016	August 25th, 2017	No
Jia Yueting		61,875,000.00	October 21st, 2016	October 20th, 2017	No
LeTV Information Technology		300,000,000.00	December 28th, 2015	December 28th, 2017	No
(Tianjin) Co., Ltd.
LeTV Holdings (Beijing) Co.,	1,000,000,000.00		December 12th, 2016	December 12th, 2018	No
Ltd., Jia Yueting
Leshi Zhixin Electronic		953,095,528.89	May 10th, 2016	May 10th, 2019	No
Technology (Tianjin) Limited
Leshi Zhixin Electronic	1,071,350,280.00		May 6th, 2016	May 6th, 2019	No
Technology (Tianjin) Limited
LeTV Holdings (Beijing) Co.,		3,000,000.00	May 5th, 2016	May 5th, 2017	No
Ltd., Gao Jianming, Zhang
Zhao

Explanation on guarantee with connected parties

Note: The subject matter of the RMB1 billion of pledge guarantee provided by LeTV Holdings (Beijing) Co., Ltd. and Jia Yueting to Leshi Zhixin is the 21.67% equity held by LeTV Holdings (Beijing) Co., Ltd. in Leshi Zhixin and the 58,540,000 shares held by Jia Yueting in the Company; the subject matter of the RMB2.024 billion of pledge guarantee provided by Leshi Zhixin to LeTV Zhixin Investment (Hong Kong) Co., Ltd. is the RMB2.127 billion cash deposit.

(5) Call loans with connected parties

Unit: RMB

Connected party Amount Starting date Expiring date Borrowing Jia Yueting 2,600,718.00 June 15th, 2015 June 14th, 2024 Jia Yuefang 433,735,654.62 December 10th, December 10th, 2014 2019

Note

See Announcement 2015-063 for details See Announcement 2014-116 for details

Lending

LeTV E-commerce 430,586,764.30 (Beijing) Co., Ltd.

— 422 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (6) Asset transfer and debt restructuring of connected parties

None

• (7) Remuneration of key executives

		Unit: RMB
	Amount incurred	Amount incurred
Item	in the current period	in the last period
Jia Yueting	510,000.00	600,000.00
Han Fangming	750,000.00	320,000.00
Liu Hong	600,000.00	600,000.00
Deng Wei	0.00	500,000.00
Zhang Changsheng	0.00	110,000.00
Shen Yanfang	0.00	110,000.00
Cao Bin	140,000.00	30,000.00
Zhu Ning	140,000.00	30,000.00
Wu Meng	390,000.00	260,000.00
Yuan Bin	950,000.00	240,000.00
Zhang Minhui	1,200,000.00	180,000.00
Wu Yazhou	1,270,000.00	790,000.00
Liang Jun	1,200,000.00	1,690,000.00
Jin Jie	650,000.00	580,000.00
Gao Fei	1,260,000.00	770,000.00
Yang Yongqiang	480,000.00	480,000.00
Tan Shu	900,000.00	710,000.00
Yang Lijie	540,000.00	540,000.00
Zhang Te	0.00	370,000.00
Zhao Kai	450,000.00	60,000.00
Lei Zhenjian	0.00	660,000.00
Jia Yuemin	0.00	480,000.00
Liu Gang	0.00	60,000.00
Jiang Xiaolin	590,000.00	150,000.00
Total	12,020,000.00	10,320,000.00

— 423 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (8) Other connected transactions

• Receivables and payables of connected party

• (1) Receivables

Unit: RMB

		Balance at the end of the	Balance at the end of the	**Balance at the **	beginning of
		period		the period
		Book	Provision for	Book	Provision for
Item name	Connected party	balance	bad debts	balance	bad debts
Accounts	Le Corporation	204,169,543.46	6,202,946.67	66,271,745.00	1,988,152.35
receivable	Limited
Accounts	LETechnology	159,089,735.51	4,772,692.07	0.00	0.00
receivable	Incorporated
Accounts	Le Wish Ltd.	85,706,635.00	8,187,189.01	80,228,428.00	2,406,852.84
receivable
Accounts	Beijing Oriental	125,976,648.00	3,779,299.44	0.00	0.00
receivable	Carring Information
	Technology Co.,
	Ltd.
Accounts	Leka Automobile	26,805,028.43	2,327,249.30	21,823,172.18	654,695.17
receivable	Intelligent
	Technology
	(Beijing) Co., Ltd.
Accounts	Lepa Marketing	230,677,079.60	6,920,312.39	0.00	0.00
receivable	Services (Beijing)
	Co., Ltd.
Accounts	LeTV E-commerce	359,040,221.12	10,988,906.24	0.00	0.00
receivable	(Beijing) Co., Ltd.
Accounts	LeTV Inter	43,853,451.39	1,315,603.54	0.00	0.00
receivable	Entertainment
	Technology Co.,
	Ltd.
Accounts	LeTV Holdings	213,218,739.08	6,396,562.17	16,929.16	507.87
receivable	(Beijing) Co., Ltd.
Accounts	LeTV Mobile	15,634,059.62	1,531,825.81	0.00	0.00
receivable	E-commerce
	(Beijing) Co., Ltd.
Accounts	LeTV Sports Culture	36,236,818.18	1,087,104.55	40,556,400.84	1,216,692.02
receivable	Development
	(Beijing) Co., Ltd.

— 424 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

			Balance at the end of the	Balance at the end of the	Balance at the end of the	**Balance at the **	beginning of
			period			the period
			Book	Provision for		Book	Provision for
Item name	Connected party		balance		bad debts	balance	bad debts
Accounts	LeTV Mobile		751,612,657.29	23,678,249.83		241,213,868.73	7,236,416.06
receivable	Intelligent
	Information
	Technology
	(Beijing) Co., Ltd.
Accounts	LeTV Smart	1,348,660,964.83		40,459,828.94		0.00	0.00
receivable	Terminal Science
	& Technology
	Co., Ltd.
Accounts	Lexin (Beijing)		69,755,100.12	2,092,653.00		0.00	0.00
receivable	Network Technology
	Co., Ltd.
Accounts	Faledi (Beijing)		30,000,000.00		900,000.00	0.00	0.00
receivable	Network Technology
	Co., Ltd.
Accounts	Yulong Computer		60,917,805.00	1,827,534.15		0.00	0.00
receivable	Telecommunication
	Scientific
	(Shenzhen) Co., Ltd.
Accounts	LeREE, Ltd.Co.		7,022,846.54		210,685.40	0.00	0.00
receivable
Accounts	LeEcosystem		5,202,842.95		156,085.29	0.00	0.00
receivable	Technology India
	Private Limited
Accounts	Leying Network		14.44		0.43	54,984.64	1,649.54
receivable	Information
	(Tianjin) Co., Ltd.
Accounts	Leyi Interconnection		368,825.95		11,064.78	0.00	0.00
receivable	Intelligent
	Technology
	(Beijing) Co., Ltd.
Accounts	Lingpai Lexiang		100,000.00		3,000.00	0.00	0.00
receivable	Network Information
	(Beijing) Co., Ltd.
Accounts	LeTV Automobile		893,684.90		26,810.55	0.00	0.00
receivable	(Beijing) Co., Ltd.
Accounts	TCL King Electrical		18,000,000.00		540,000.00	0.00	0.00
receivable	Appliances
	(Huizhou) Co., Ltd.

— 425 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		Balance at the end of the	Balance at the end of the	Balance at the end of the	**Balance at the **	beginning of
		period			the period
		Book	Provision for		Book	Provision for
Item name	Connected party	balance		bad debts	balance	bad debts
Accounts	Beijing Wangjiu	1,631,245.05		100,240.37	13,388,157.93	401,644.74
receivable	Electronic
	Commerce Co., Ltd.
Accounts	Beijing Edooon	44,620.00		1,338.60	0.00	0.00
receivable	Sport Network
	Technology Co.,
	Ltd.
Accounts	Lele Innovative	1,784,742.60		53,542.28	0.00	0.00
receivable	Intelligent
	Technology
	(Beijing) Co., Ltd.
Accounts	LeTV Chuangjing	518,793.32		15,563.80	0.00	0.00
receivable	Technology
	(Beijing) Co., Ltd.
Accounts	LeTV Virtual	7,040.00		211.20	0.00	0.00
receivable	Reality Technology
	(Beijing) Co., Ltd.
Accounts	Le Vision Pictures	1,105,470.76		33,164.12	0.00	0.00
receivable	(Beijing) Co., Ltd.
Advance	Lepa Marketing	1,881.00		0.00	0.00	0.00
payments	Services (Beijing)
	Co., Ltd.
Advance	LeTV Mobile	318,010,862.55		0.00	82,540,876.78	0.00
payments	E-commerce
	(Beijing) Co., Ltd.
Advance	LeTV Mobile	33,010,516.09		0.00	22,000.00	0.00
payments	Intelligent
	Information
	Technology
	(Beijing) Co., Ltd.
Advance	Le Vision Pictures	806,000.00		0.00	0.00	0.00
payments	(Beijing) Co., Ltd.
Other	Le Corporation	797,982.86		23,939.49	0.00	0.00
receivables	Limited
Other	LeTV E-commerce	430,586,764.30	12,917,602.93		0.00	0.00
receivables	(Beijing) Co., Ltd.
Other	LeTV Holdings	0.00		0.00	10,841,367.97	325,241.04
receivables	(Beijing) Co., Ltd.

— 426 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		**Balance at the **	end of the	**Balance at the **	beginning of
		period		the period
		Book	Provision for	Book	Provision for
Item name	Connected party	balance	bad debts	balance	bad debts
Other	Shenzhen LeTV	3,500.00	105.00	0.00	0.00
receivables	Xingen Investment
	Partnership (limited
	partnership)
Other	LeTV Mobile	0.00	0.00	6,325,530.74	189,765.92
receivables	Intelligent
	Information
	Technology
	(Beijing) Co., Ltd.
Other	Lepa Marketing	0.00	0.00	16,767,553.14	503,026.59
receivables	Services (Beijing)
	Co., Ltd.
Other	LeTV Sports Culture	0.00	0.00	801,512.61	24,045.38
receivables	Development
	(Beijing) Co., Ltd.
Interests	Beijing Hongcheng	133,333.33	0.00	0.00	0.00
receivable	Xintai Real Estate
	Co., Ltd.
Interests	Beijing Jinyi Asset	2,025,000.00	0.00	0.00	0.00
receivable	Management Center
	(limited partnership)
Interests	Beijing Wangjiu	430,700.67	0.00	0.00	0.00
receivable	Electronic
	Commerce Co., Ltd.
Interests	Lefeng Holdings	51,111.11	0.00	0.00	0.00
receivable	(Beijing) Co., Ltd.
Interests	Leka Inter	1,675,000.00	0.00	0.00	0.00
receivable	Entertainment
	(Beijing)
	Information
	Technology Co.,
	Ltd.
Interests	Leka Automobile	161,111.11	0.00	0.00	0.00
receivable	Intelligent
	Technology
	(Beijing) Co., Ltd.
Interests	LeTV Haiyun	2,025,000.00	0.00	0.00	0.00
receivable	Culture Media
	(Beijing) Co., Ltd.

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APPENDIX II

		**Balance at the **	end of the	**Balance at the **	beginning of
		period		the period
		Book	Provision for	Book	Provision for
Item name	Connected party	balance	bad debts	balance	bad debts
Interests	LeTV	2,066,666.67	0.00	0.00	0.00
receivable	Interconnection
	Technology
	(Beijing) Co., Ltd.
Interests	LeTV Supply Chain	75,000.00	0.00	0.00	0.00
receivable	Services Financial
	Technology
	(Beijing) Co., Ltd.
Interests	LeTV	166,666.66	0.00	0.00	0.00
receivable	Communications
	(Beijing)
	Information
	Technology Co.,
	Ltd.
Interests	LeTV Investment	2,066,666.67	0.00	0.00	0.00
receivable	Management
	(Beijing) Co., Ltd.
Interests	Lexiang Shijie	88,888.89	0.00	0.00	0.00
receivable	(Beijing)
	Information
	Technology Co.,
	Ltd.
Interests	Lexin (Beijing)	2,066,666.67	0.00	0.00	0.00
receivable	Network Technology
	Co., Ltd.
Interests	Lingpai Lexiang	483,333.33	0.00	0.00	0.00
receivable	Network Information
	(Beijing) Co., Ltd.
Interests	Ningbo Meishan	305,555.55	0.00	0.00	0.00
receivable	Bonded Port Area
	Hyacinth Asset
	Management Co.,
	Ltd.
Interests	Zhixing Weidao	66,666.66	0.00	0.00	0.00
receivable	(Beijing)
	Information
	Technology Co.,
	Ltd.

— 428 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

		**Balance at the **	end of the	**Balance at the **	beginning of
		period		the period
		Book	Provision for	Book	Provision for
Item name	Connected party	balance	bad debts	balance	bad debts
Interests	Chongqing LeTV	881,666.67	0.00	0.00	0.00
receivable	Commercial
	Factoring Co., Ltd.
Other	Beijing Leyang	204,318,550.51	0.00	0.00	0.00
non-current	Entertainment Co.,
assets	Ltd.
Other	Lesifang Culture	2,324,986.00	0.00	0.00	0.00
non-current	Media (Beijing) Co.,
assets	Ltd.
Other	Lexi Culture Media	144,000,000.00	0.00	0.00	0.00
non-current	(Beijing) Co., Ltd.
assets
Other	Khorgos Le Vision	69,200,000.00	0.00	0.00	0.00
non-current	Pictures Co., Ltd.
assets
Other	Le Vision Pictures	9,600,000.00	0.00	0.00	0.00
non-current	(Beijing) Co., Ltd.
assets
Loans	Beijing Hongcheng	30,000,000.00	300,000.00	0.00	0.00
	Xintai Real Estate
	Co., Ltd.
Loans	Beijing Jinyi Asset	30,000,000.00	300,000.00	0.00	0.00
	Management Center
	(limited partnership)
Loans	Beijing Wangjiu	25,000,000.00	250,000.00	0.00	0.00
	Electronic
	Commerce Co., Ltd.
Loans	Lefeng Holdings	23,000,000.00	230,000.00	0.00	0.00
	(Beijing) Co., Ltd.
Loans	Leka Inter	30,000,000.00	300,000.00	0.00	0.00
	Entertainment
	(Beijing)
	Information
	Technology Co.,
	Ltd.
Loans	Leka Automobile	10,000,000.00	100,000.00	0.00	0.00
	Intelligent
	Technology
	(Beijing) Co., Ltd.

— 429 —

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FINANCIAL INFORMATION OF LESHI INTERNET

		**Balance at the **	end of the	**Balance at the **	beginning of
		period		the period
		Book	Provision for	Book	Provision for
Item name	Connected party	balance	bad debts	balance	bad debts
Loans	LeTV Haiyun	30,000,000.00	300,000.00	0.00	0.00
	Culture Media
	(Beijing) Co., Ltd.
Loans	LeTV	30,000,000.00	300,000.00	0.00	0.00
	Interconnection
	Technology
	(Beijing) Co., Ltd.
Loans	LeTV Supply Chain	30,000,000.00	300,000.00	0.00	0.00
	Services Financial
	Technology
	(Beijing) Co., Ltd.
Loans	LeTV	25,000,000.00	250,000.00	0.00	0.00
	Communications
	(Beijing)
	Information
	Technology Co.,
	Ltd.
Loans	LeTV Investment	30,000,000.00	300,000.00	0.00	0.00
	Management
	(Beijing) Co., Ltd.
Loans	Lexiang Shijie	20,000,000.00	200,000.00	0.00	0.00
	(Beijing)
	Information
	Technology Co.,
	Ltd.
Loans	Lexin (Beijing)	30,000,000.00	300,000.00	0.00	0.00
	Network Technology
	Co., Ltd.
Loans	Lingpai Lexiang	30,000,000.00	300,000.00	0.00	0.00
	Network Information
	(Beijing) Co., Ltd.
Loans	Ningbo Meishan	20,000,000.00	200,000.00	0.00	0.00
	Bonded Port Area
	Hyacinth Asset
	Management Co.,
	Ltd.

— 430 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		**Balance at the **	end of the	end of the		**Balance at the **	beginning of
		period				the period
		Book	Provision for			Book	Provision for
Item name	Connected party balance			bad debts		balance	bad debts
Loans	Zhixing	Weidao 30,000,000.00		300,000.00		0.00	0.00
	(Beijing)
	Information
	Technology Co.,
	Ltd.
Loans	Chongqing LeTV 30,000,000.00			300,000.00		0.00	0.00
	Commercial
	Factoring Co., Ltd.
(2) Payables
							Unit: RMB
					Ending book		Opening book
Item name		Connected party				balance	balance
Accounts payable		Beijing Hongcheng Xintai Real Estate			11,295,045.30		3,232,376.40
		Co., Ltd.
Accounts payable		Beijing Wangjiu Electronic Commerce				4,768,266.00	20,757.00
		Co., Ltd.
Accounts payable		LeTV Mobile E-commerce (Beijing)				1,118,524.00	30,049,238.73
		Co., Ltd.
Accounts payable		LeTV Sports Culture Development			33,030,536.69		1,319,470.64
		(Beijing) Co., Ltd.
Accounts payable		Le Vision Pictures (Beijing) Co.,		Ltd.	19,242,779.66		306,720,776.22
Accounts payable		Leyi Interconnection Intelligent				561,319.39	12,227,679.30
		Technology (Beijing) Co., Ltd.
Accounts payable		Chongqing LeTV Commercial				244,444.58	0.00
		Factoring Co., Ltd.
Accounts payable		Le Vision Pictures (Tianjin) Co.,		Ltd.	51,638,720.00		36,000,000.00
Accounts payable		LeTV Feige Technology (Tianjin)		Co.,		71,998.20	2,328,783.83
		Ltd.
Accounts payable		Yulong Computer Telecommunication			36,165,287.55		0.00
		Scientific (Shenzhen) Co., Ltd.
Accounts payable		Cymbidium Yushu (Beijing)				65,041.25	0.00
		Technology Co., Ltd.
Accounts payable		Zhejiang Tianle Micro-electronics			88,661,949.24		0.00
		Technology Corporation Limited
Accounts payable		TCL Overseas Electronic (Huizhou)			472,773,317.33		0.00
		Co., Ltd.

— 431 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		Ending book	Opening book
Item name	Connected party	balance	balance
Accounts payable	TCL Technology Electronics (Huizhou)	450,180.64	0.00
	Co., Ltd.
Accounts payable	LeTV Mobile Intelligent Information	0.00	73,536.00
	Technology (Beijing) Co., Ltd.
Advance receipts	Lepa Marketing Services (Beijing)	19,972,233.91	0.00
	Co., Ltd.
Advance receipts	LeTV Commercial Technology	1,200,000.00	0.00
	(Beijing) Co., Ltd.
Advance receipts	Beijing Zhiyi Information Technology	810,413.00	478,309,755.24
	Co., Ltd.
Advance receipts	LeTV E-commerce (Beijing) Co., Ltd.	493,136.12	0.00
Advance receipts	Lexin (Beijing) Network Technology	76,945.00	0.00
	Co., Ltd.
Advance receipts	LeTV Sports Culture Development	0.00	223,667.90
	(Beijing) Co., Ltd.
Other payables	LeTV Sports Culture Development	50,809.50	0.00
	(Beijing) Co., Ltd.
Other payables	LeTV Holdings (Beijing) Co., Ltd.	1,348,333.34	0.00
Other payables	LeTV Holdings (Hong Kong) Co., Ltd.	12,063,181.84	0.00
Other payables	LeTV Virtual Reality Technology	0.00	179,458.00
	(Beijing) Co., Ltd.
Other payables	LeTV Mobile E-commerce (Beijing)	0.00	6,578.00
	Co., Ltd.
Other payables	Le Vision Pictures (Beijing) Co., Ltd.	0.00	2,400.00
Interest payable	Olive Tree Asset Management	6,070,103.06	0.00
	(Jiaxing) Co., Ltd.
Financial assets sold	Olive Tree Asset Management	321,734,000.00	0.00
for repurchase	(Jiaxing) Co., Ltd.

7. Undertakings of connected parties

(1) Guarantee for accounts receivable from connected parties

In the current period connected transactions increased due to the event set out in Note XVI (7) 3 and growing business volume of connected parties. Recovery of accounts receivable under Note XI (3) 1 depends on the operation status of various connected companies. The Company’s actual controller Jia Yueting provided guarantee for the aforesaid accounts receivable.

(2) Pledge and guarantee of stock rights concerning LeCloud Computing Co., Ltd.

In 2016 the Company’s holding subsidiary LeCloud Computing Co., Ltd. (hereinafter referred to as “LeCloud Computing”) introduced an investor Chongqing Strategic Emerging Industry LeCloud

— 432 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Special Equity Investment Fund Joint Venture (limited partnership) (hereinafter referred to as “Chongqing Strategic Joint Venture”), which increased RMB1 billion of investment in it, including RMB132,524,000 of increase in paid-in capital and RMB867,476,000 of increase in capital reserve. After the capital increase Chongqing Strategic Joint Venture held 16.67% equity in LeCloud Computing.

LeTV Holdings (Beijing) Co., Ltd. provided pledge guarantee to the RMB1 billion investment by Chongqing Strategic Joint Venture with all the equity legally held by it in LeCloud Computing, and the amount of pledged equity is RMB265,048,000, namely, the amount of registered capital of LeTV Holdings (Beijing) Co., Ltd. The two parties agreed that Chongqing Strategic Joint Venture had the right to require LeTV Holdings (Beijing) Co., Ltd. to acquire part or all of the underlying equity in any of the following circumstances: ①Any of the following business goals is not achieved: 1) RMB650 million of operating revenue for 2016; 2) RMB780 million of operating revenue for 2017; 3) RMB800 million of operating revenue for January-September 2018; ②LeCloud Computing is not listed during the period from the date on which Chongqing Strategic Joint Venture paid the principal of equity investment to LeCloud Computing to the date on which three full years has passed since Chongqing Strategic Joint Venture made the investment; ③LeCloud Computing is to be closed down, be dissolved, experience major restructuring or go bankrupt during the period when Chongqing Strategic Joint Venture holds the equity of LeCloud Computing; ④LeCloud Computing is listed during the period from the date on which Chongqing Strategic Joint Venture paid the principal of equity investment to LeCloud Computing to the date on which three full years has passed since Chongqing Strategic Joint Venture made the investment, but the annualized return of disposing the underlying equity after the listing is lower than 15%. Meanwhile, Jia Yueting bears unlimited joint and several liability for the acquisition and cash replenishment obligations of LeTV Holdings (Beijing) Co., Ltd.

As at December 31st, 2016, LeTV Holdings (Beijing) Co., Ltd. subscribed for RMB265,048,000 of shares and paid in RMB20 million. Since the time for capital contribution as specified in the articles of association is June 22nd, 2016, LeTV Holdings (Beijing) Co., Ltd. failed to timely pay in the capital contribution.

(3) Investment guarantee concerning Coolpad Group Limited

In 2016 Shenzhen LeTV Xingen M&A Fund Investment Management Partnership (limited partnership) (hereinafter referred to as “Xingen Partnership”), a company under the Company’s subsidiary Beijing LeTV Streaming Media Advertising Co., Ltd., purchased 551,367,386 shares (shareholding percentage 10.99%) of Coolpad Group Limited with RMB888,352,656.34.

The Company, LeTV Holdings (Beijing) Co., Ltd. and Jia Yueting have the obligations of long-term repurchase and difference make-up. Return of this transaction is the total of the simple interest calculated at a rate of 15% during the three years of shareholding. The investments will be recouped in full three years later. All stock investments will be repurchased by the Company, LeTV Holdings (Beijing) Co., Ltd. and Jia Yueting three years later with the transfer price (including the principal and interest of investments). If the underlying stocks or the right to stock returns are (is)

— 433 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

purchased, disposed or sold as a whole within three years but the return thereof is less than the transfer price, the Company, LeTV Holdings (Beijing) Co., Ltd. and Jia Yueting are jointly liable for unconditionally making up the difference to Xingen Partnership, resulting in the return obtained not lower than the transfer price.

(4) Investment guarantee concerning TCL Multimedia Technology Holdings Limited

In 2016 the Company’s holding subsidiary Leshi Zhixin Electronic Technology (Tianjin) Limited (hereinafter referred to as “Leshi Zhixin”) subscribed for 348,850,000 shares (shareholding percentage 20.10%) newly issued by TCL Multimedia Technology Holdings Limited at a price of HK$6.50 per share, amounting to HK$2,267,525,000.00 in total, equivalent to RMB1,906,988,525.00.

Leshi Zhixin designated its subsidiary LeTV Zhixin Investment (Hong Kong) Co., Ltd. as the subscriber of this investment and adopted an “Onshore Guarantees for Offshore Loans” approach for this investment, that is, Shenzhen LeTV Xingen M&A Fund Investment Management Partnership (limited partnership) (hereinafter referred to as “Xingen Partnership”) paid RMB1,906,988,525.00 to Leshi Zhixin, which then kept the monies in the bank account as limited funds for guarantee; after obtaining the loans as per the guaranteed amount, LeTV Zhixin Investment (Hong Kong) Co., Ltd. then invested in TCL Multimedia Technology Holdings Limited with the loans. In this way, Xingen Partnership obtained the right to stock returns of this investment.

The Company, LeTV Holdings (Beijing) Co., Ltd. and Jia Yueting have the obligations of long-term repurchase and difference make-up. Return of this transaction is the total of the simple interest calculated at a rate of 15% during the three years of shareholding. The investments will be recouped in full three years later. All stock investments will be repurchased by the Company, LeTV Holdings (Beijing) Co., Ltd. and Jia Yueting three years later with the transfer price (including the principal and interest of investments). If the underlying stocks or the right to stock returns are (is) purchased, disposed or sold as a whole within three years but the return thereof is less than the transfer price, the Company, LeTV Holdings (Beijing) Co., Ltd. and Jia Yueting are jointly liable for unconditionally making up the difference to Xingen Partnership, resulting in the return obtained not lower than the transfer price.

8. Others

XIII. Share-based payment

1. Overall information of share-based payment

• Applicable □ Not Applicable

— 434 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Unit: RMB

• Total amount of the Company’s equity instruments granted in the current period

• Total amount of the Company’s equity instruments exercised in the current period

• Total amount of the Company’s equity instruments invalidated in the current period

• Scope of exercise price of the Company’s stock options outstanding at the end of the period and remaining contract period

• Scope of exercise price of the Company’s other equity instruments outstanding at the end of the period and remaining contract period

0.00 47,419,268.57

14,204,375.33

Exercise price of the Company’s stock options outstanding at the end of the period was RMB3.584, RMB5.511, RMB19.157 and RMB38.809; the options were last exercised on October 12th, 2020 None

Other descriptions

1. Equity-settled share-based payment

2. Applicable □ Not Applicable

Unit: RMB

The method of determining the fair value of equity instrument Black-Scholes model on the grant date

Basis for determining the quantity of exercisable equity The quantity of exercisable instruments equity instruments was estimated based on the latest change in the number of persons who can exercise options and accomplishment of business goals and other follow-up information updated

Reasons for significant difference between the current estimate None and previous estimate

• Accumulated amount of equity-settled share-based payment included in the capital reserve

• Total recognized amount of equity-settled share-based payment in the current period

• 379,839,069.45 163,309,126.37

Other descriptions

1. Cash-settled share-based payment

2. Applicable � Not Applicable

— 435 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Amendment and termination of share-based payment

None

1. Others

XIV. Commitments and contingencies

1. Important commitments

Important commitments on the balance sheet date

As at December 31st, 2016, the Company had signed the following irrevocable lease contracts:

1. Operating lease

Minimum rental payment of irrevocable operating lease The first year after balance sheet date The second year after balance sheet date Total	Amount (RMB’0,000) 6,170.46 4,382.84
	10,553.30

(1) Finance lease

• 1) The Group signed a master lease agreement with Hewlett-Packard Leasing Limited, involving a total rental amount of RMB16,543,905.52. The rental was paid by season (postpaid) in 12 installments, namely, RMB1,378,650.46 for each installment.

Lease period The first year after balance sheet date The second year after balance sheet date Total	Amount (RMB) 1,378,750.46 0.00
	1,378,750.46

• 2) The Group signed a fixed asset finance lease agreement with Beijing Branch of China Telecom Corporation Limited, involving a total rental amount of RMB7,411,950.36. The rental was paid by season (postpaid) in 12 installments, namely, RMB617,662.53 for each installment.

— 436 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Lease period	Lease period		Amount
			(RMB)
The first	year after balance sheet date		411,775.02
The second year after balance sheet date			0.00
Total			411,775.02
3)	The Group signed a master lease agreement with Hewlett-Packard Leasing Limited,
	involving a total rental amount of RMB4,306,060.00. The rental was paid		by season
	(postpaid) in 12 installments, namely, RMB358,830.00 for each installment.
Lease period			Amount
			(RMB)
The first	year after balance sheet date		717,760.00
The second year after balance sheet date			0.00
Total			717,760.00
4)	The Group signed a master lease agreement with Hewlett-Packard Leasing Limited,
	involving a total rental amount of RMB25,884,610.00. The rental was paid		by season
	(postpaid) in 12 installments, namely, RMB2,157,142.50 for each installment.
Lease period			Amount
			(RMB)
The first	year after balance sheet date	4,314,185.00
The second year after balance sheet date			0.00
Total		4,314,185.00
5)	The Group signed a master lease agreement with Hewlett-Packard Leasing Limited,
	involving a total rental amount of RMB4,633,188.28. The rental was paid		by season
	(postpaid) in 12 installments, namely, RMB386,090.69 for each installment.

Lease period The first year after balance sheet date The second year after balance sheet date Total	Amount (RMB) 1,544,362.76 772,281.38
	2,316,644.14

— 437 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

• 6) The Group signed a master lease agreement with Hewlett-Packard Leasing Limited, involving a total rental amount of RMB8,732,944.48. The rental was paid by season (postpaid) in 12 installments, namely, RMB727,737.04 for each installment.

Lease period The first year after balance sheet date The second year after balance sheet date Total	Amount (RMB) 2,910,948.16 727,837.04
	3,638,785.20

• 7) The Group signed a master lease agreement with Hewlett-Packard Leasing Limited, involving a total rental amount of RMB10,124,752.00. The rental was paid by season (postpaid) in 12 installments, namely, RMB843,721.00 for each installment.

Lease period The first year after balance sheet date The second year after balance sheet date Total	Amount (RMB) 3,374,884.00 1,687,542.00
	5,062,426.00

• 8) The Group signed a master lease agreement with Hewlett-Packard Leasing Limited, involving a total rental amount of RMB33,263,880.16. The rental was paid by season (postpaid) in 12 installments, namely, RMB2,771,981.68 for each installment.

Lease period The first year after balance sheet date The second year after balance sheet date Total	Amount (RMB) 11,087,926.72 11,088,026.72
	22,175,953.44

• 9) The Group signed a master lease agreement with Hewlett-Packard Leasing Limited, involving a total rental amount of RMB22,163,210.44. The rental was paid by season (postpaid) in 12 installments, namely, RMB1,846,925.87 for each installment.

— 438 —

APPENDIX II FINANCIAL INFORMATION OF LESHI INTERNET

Lease period The first year after balance sheet date The second year after balance sheet date Total	Amount (RMB) 7,387,703.48 7,387,703.48
	14,775,406.96

• 10) The Group signed a master lease agreement with Hewlett-Packard Leasing Limited, involving a total rental amount of RMB46,858,308.95. The rental was paid by season (postpaid) in 12 installments, namely, RMB3,904,849.33 for each installment.

Lease period The first year after balance sheet date The second year after balance sheet date Total	Amount (RMB) 15,619,397.32 15,619,397.32
	31,238,794.64

• 11) The Group signed a master lease agreement with Hewlett-Packard Leasing Limited, involving a total rental amount of RMB15,155,575.00. The rental was paid by season (postpaid) in 12 installments, namely, RMB1,262,955.75 for each installment.

Lease period The first year after balance sheet date The second year after balance sheet date Total	Amount (RMB) 5,051,823.00 5,051,823.00
	10,103,646.00

• 12) The Group signed a master lease agreement with Hewlett-Packard Leasing Limited, involving a total rental amount of RMB10,661,872.00. The rental was paid by season (postpaid) in 12 installments, namely, RMB888,481.00 for each installment.

— 439 —

APPENDIX II FINANCIAL INFORMATION OF LESHI INTERNET

Lease period The first year after balance sheet date The second year after balance sheet date Total	Amount (RMB) 3,553,924.00 3,553,924.00
	7,107,848.00

• 13) The Group signed a master lease agreement with Hewlett-Packard Leasing Limited, involving a total rental amount of RMB18,073,943.68. The rental was paid by season (postpaid) in 12 installments, namely, RMB1,506,153.64 for each installment.

Lease period The first year after balance sheet date The second year after balance sheet date Total	Amount (RMB) 6,024,614.56 6,024,614.56
	12,049,229.12

• 14) The Group signed a master lease agreement with Hewlett-Packard Leasing Limited, involving a total rental amount of RMB11,420,130.28. The rental was paid by season (postpaid) in 12 installments, namely, RMB951,669.19 for each installment.

Lease period The first year after balance sheet date The second year after balance sheet date Total	Amount (RMB) 3,806,676.76 3,806,676.76
	7,613,353.52

• 15) The Group signed a master lease agreement with Beijing Culture & Technology Financial Leasing Company Limited, involving a total rental amount of RMB163,231,463.44. The rental was paid by season (postpaid) in 12 installments, namely, RMB13,636,688.62 for each installment.

— 440 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Lease period The first year after balance sheet date The second year after balance sheet date Total	Amount (RMB) 54,546,754.48 54,546,754.48
	109,093,508.96

2. Contingencies

• (1) Important contingencies on the balance sheet date

• Lawsuit with Zhuchang Precision

On January 20th, 2015, Zhuchang Precision Stamping (Shanghai) Co., Ltd. (hereinafter referred to as Zhuchang Precision) and Leshi Zhixin Electronic Technology (Tianjin) Limited (hereinafter referred to as Leshi Zhixin) signed a Purchase Framework Agreement . Meanwhile, Zhuchang Precision, Leshi Zhixin and LeTV Mobile Intelligent Information Technology (Beijing) Co., Ltd. (hereinafter referred to as LeTV Mobile Intelligent) signed a Supplementary Agreement on Participation based on the master contract Purchase Framework Agreement . The Supplementary Agreement mainly specifies that LeTV Mobile Intelligent shall have the rights and obligations under the master contract Purchase Framework Agreement . From March 4th, 2015 to September 8th, 2015, LeTV Mobile Intelligent placed an order with Zhuchang Precision to purchase silver FOR MP and S1 products of Upp-ASSY assembly. Zhuchang Precision issued an invoice and delivered goods worth US$1,021,653.00 to LeTV Mobile Intelligent. LeTV Mobile Intelligent has paid US$299,583.03 and still owed US$722,069.97. As Zhuchang Precision prepared materials based on the purchase order of LeTV Mobile Intelligent, there are slow-moving materials worth US$3,629,329.23 now. On November 24th, 2016, Zhuchang Precision lodged a lawsuit to the Second Intermediate People’s Court of Tianjin against Leshi Zhixin, involving a subject matter of RMB21,128,871.00 in total. This case is under court trial.

2. Lawsuit with Hi-P Metal

On September 4th, 2014, Hi-P (Shanghai) Metal Industries Co., Ltd. (hereinafter referred to as Hi-P Metal) and Leshi Zhixin Electronic Technology (Tianjin) Limited (hereinafter referred to as Leshi Zhixin) signed a Purchase Framework Agreement and its appendix Purchase Order Template , etc. Due to business needs, on February 2nd, 2015, Hi-P Metal, Leshi Zhixin, LeTV Mobile Intelligent Information Technology (Beijing) Co., Ltd. (LeTV Mobile Intelligent) and Hi-P Electronic Pte. Ltd. (hereinafter referred to as Hi-P) signed a Participation Agreement based on the master contract Purchase Agreement . The Participation Agreement mainly specifies that LeTV Mobile Intelligent shall have the rights and obligations under the master contract Purchase Framework Agreement . LeTV Mobile Intelligent placed an order with Hi-P to purchase goods in July 2015. As at November 9th, 2016, LeTV Mobile Intelligent had not received goods, leading to stagnation of products worth

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US$2,807,003.67 of Hi-P. On November 18th, 2016, Hi-P transferred the creditor’s rights concerning the order to Hi-P Metal. On November 25th, 2016, Hi-P Metal lodged a lawsuit to the Second Intermediate People’s Court of Tianjin against Leshi Zhixin, involving a subject matter of RMB21,128,871 in total. This case is under court trial.

1. Provision of repurchase guarantee for raised funds of LE M&A Fund Phase I

On March 26th, 2016, the Company issued an announcement regarding provision of repurchase guarantee for raised funds of LE M&A Fund Phase I (announcement No.: 2016-042): the Company, together with its connected party LeTV Holdings (Beijing) Co., Ltd. and actual controller Mr. Jia Yueting, planned to provide joint and several liability guarantee for repurchase of principal and expected earnings of raised funds of LE M&A Fund Phase I under the precondition of controllable risks, with a guarantee term of not more than five years. As at December 31st, 2016, a principal of RMB3,349 million of the funds raised by the predominant and junior partners of LE M&A Fund Phase I was actually in place.

Except for the aforesaid matters, the Group incurred no other important contingencies.

• (2) A note should also be given if the Company had no important contingencies needing to be disclosed

The Company had no important contingencies needing to be disclosed.

1. Others

XV. Events subsequent to balance sheet date

1. Important non-adjusting events

2. Profit distribution

	Unit: RMB
Profits or dividends to be distributed	554,759,227.43
Profits or dividends announced to be distributed upon deliberation and
approval	55,852,162.69

1. Sales return

2. Other events after balance sheet date

3. Other major events after balance sheet date

4. (1) Introduction of important strategic investor Tianjin Jiarui Huixin Enterprise Management Co., Ltd.

On January 13th, 2017, the Company issued an announcement regarding important matters of the Company and introduction of a strategic investor (announcement No. 2017-012): the Company and its

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FINANCIAL INFORMATION OF LESHI INTERNET

controlling shareholder and actual controller Mr. Jia Yueting planned to introduce the strategic investor Tianjin Jiarui Huixin Enterprise Management Co., Ltd. (hereinafter referred to as Jiarui Huixin). This transaction consists of three parts, namely, transfer of the Company’s shares by Mr. Jia Yueting (involving an amount of RMB6,041 million), introduction of a strategic investor by Leshi Zhixin Electronic Technology (Tianjin) Limited (hereinafter referred to as Leshi Zhixin) through transfer of old shares and capital and share increase (involving an amount of RMB7,950 million), and transfer of equity of Le Vision Pictures Co., Ltd. by LeTV Holdings (Beijing) Co., Ltd. (involving an amount of RMB1,050 million). Moreover, in promotion of this transaction, LeTV Zhixin made an equity financing worth RMB1,830 million from other investors.

On March 30th, 2017, the Company received a Confirmation Letter for Securities Transfer and Registration from Shenzhen Branch of China Securities Depository and Clearing Corporation Limited. The procedures for transfer and registration of Letv’s 170,711,107 shares transferred by Mr. Jia Yueting at RMB35.39/share according to agreement this time have been completed and the shares have been registered in the name of Jiarui Huixin. Besides, Jiarui Huixin has completed all payments according to agreement.

The Company has received RMB760 million paid by Jiarui Huixin for transfer of equity of Leshi Zhixin and Leshi Zhixin has received RMB2030 million from Jiarui Huixin for capital increase. Jiarui Huixin has remitted other equity investment funds to relevant shareholders other than the listed company according to requirements.

• (2) Capital and share increase of the holding subsidiary Leshi Zhixin Electronic Technology (Tianjin) Limited

In 2016, the Company’s holding subsidiary Leshi Zhixin Electronic Technology (Tianjin) Limited (hereinafter referred to as Leshi Zhixin) introduced two investors, namely, Leran Investment Management Partnership (limited partnership) in Hangzhou Bay New Zone, Ningbo (hereinafter referred to as Leran Investment) and Huaxia Life Insurance Co., Ltd. (hereinafter referred to as Huaxia Life). In particular, Leran Investment subscribed for RMB12,633,573 of new registered capital of Leshi Zhixin at RMB1,430 million and Huaxia Life subscribed for RMB3,533,867 of new registered capital of Leshi Zhixin at RMB400 million. In January 2017, the Company registered the changes with the industry and commerce authority.

On January 13th, 2017, the Company issued an announcement regarding important matters of the Company and introduction of a strategic investor (announcement No. 2017-012): Leshi Zhixin introduced the investor Tianjin Jiarui Huixin Enterprise Management Co., Ltd. (hereinafter referred to as Jiarui Huixin). Jiarui Huixin made investment by accepting transfer of equity and subscription of new registered capital, respectively. After completion of the aforesaid transaction, the Company is still the controlling shareholder of Leshi Zhixin, with a shareholding percentage of 40.3118% and Jiarui Huixin is the second largest shareholder of Leshi Zhixin, with a shareholding percentage of 33.4959%. In March 2017, the Company registered the changes with the industry and commerce authority.

On February 14th, 2017, the Company issued an announcement regarding waiver of pre-emptive right over capital increase of the holding subsidiary (announcement No. 2017-019): Truly Electronics Manufacturing Limited (hereinafter referred to as “Truly Electronics”) injected RMB720,000,000 for

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capital and share increase of Leshi Zhixin, among which RMB7,498,865 was included in the registered capital, accounting for 2.3438% of the total share capital of Leshi Zhixin after capital increase. After completion of the capital increase, Leshi Zhixin’s registered capital increased to RMB319,951,577, the Company held 39.3670% equity of Leshi Zhixin and Leshi Zhixin is still the holding subsidiary of the Company. As at April 19th, 2017, the change has not been registered with the industry and commerce authority.

On March 28th, 2017, the Company issued an announcement regarding resolution of the 36th meeting of the 3rd Board of Directors (announcement No. 2017-029): Compal Information Technology (Kunshan) Co., Ltd. (hereinafter referred to as “Compal”) injected RMB700,000,000 for capital and share increase of Leshi Zhixin, among which RMB7,035,917 was included in the registered capital, accounting for 2.1507% of the total share capital of Leshi Zhixin after capital increase. After completion of the capital increase, Leshi Zhixin’s registered capital increased to RMB327,148,263, the Company held 38.50% equity of Leshi Zhixin and Leshi Zhixin is still the holding subsidiary of the Company. As at April 19th, 2017, the change has not been registered with the industry and commerce authority.

(3) Exercise of stock options after the period

On March 22nd, 2017, the Company issued an announcement regarding exercise conditions of the fourth exercise period in the first equity incentive plan (announcement No. 2017-028): according to the Stock Option Incentive Plan (Revised Draft) of Letv Information Technology (Beijing) Co., Ltd. deliberated and approved at the first extraordinary general meeting 2011, Proposal on the Adjustment of the Exercise Price and Number of Stock Options under the Company’s First Equity Incentive Plan and Cancellation of Some Incentive Targets’ Options deliberated and approved at the 3rd meeting of the 3rd Board of Directors held on November 3rd, 2015, Proposal on the Adjustment of the Exercise Price of Stock Options under the Company’s First Equity Incentive Plan deliberated and approved at the 19th meeting of the 3rd Board of Directors held on May 16th, 2016 and Proposal on Cancellation of Some Incentive Targets’ Options under the Company’s First Equity Incentive Plan and Adjustment of Number of Stock Options deliberated and approved at the 29th meeting of the 3rd Board of Directors held on September 30th, 2016, the 169 incentive targets under the Company’s first stock option incentive plan may exercise 13,039,969 stock options in the fourth exercise period, with an exercise price of RMB3.584/share. As at March 9th, 2017, the stock options were exercised by 169 stock option incentive targets. After exercise of stock options, the Company’s share capital changed to RMB1,994,720,096. The exercise of stock options this time has been verified by SHINEWING Certified Public Accountants (special general partnership), which issued a capital verification report (No. XYZH/2017XAA10322) for confirmation.

(4) The Company’s plan to acquire Beijing Leyang Entertainment Co., Ltd.

On March 30th, 2017, the Company issued an announcement regarding solution to involvement in horizontal competition by the Company’s controlling shareholder and his wife (announcement No. 2017-034): the Company plans to acquire 47.8261% equity held by Ms. Gan Wei in Beijing Leyang Entertainment Co., Ltd. (hereinafter referred to as Leyang Entertainment). The Company’s major shareholders Mr. Jia Yueting and Ms. Gan Wei are a couple. Implementation of the plan constitutes a connected transaction. The transaction consideration of this plan will be determined with reference

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APPENDIX II

to the assessed value of equity of Leyang Entertainment. Upon negotiation, Ms. Gan Wei is willing to determine the transaction consideration of this plan at 50% of the assessed value of equity held by her. After completion of implementation of the aforesaid plan, Ms. Gan Wei will no longer hold equity in Leyang Entertainment.

The profit promise periods are 2017, 2018 and 2019. The compensation obligor of the profit promise is Ms. Gan Wei. Within six months after the audit report 2019 of Leyang Entertainment is issued, the Company will give the remaining part of the transaction consideration to Ms. Gan Wei after deducting the compensation (if any) payable by Ms. Gan Wei to the listed company.

XVI. Other important issues

1. Correction of previous accounting errors

None

1. Debt restructuring

None

1. Asset exchange

2. (1) Exchange of non-monetary assets

None

• (2) Exchange of other assets

None

1. Annuity plan

None

5. Discontinuation of operation

None

1. Information about segments

2. (1) Determination basis and accounting policies of reporting segment

The Group determines business segments based on the internal organizational structure, management requirements and internal reporting system and determines reporting segments based on the business segments.

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FINANCIAL INFORMATION OF LESHI INTERNET

A business segment refers to a constituent part simultaneously meeting the following conditions: (1) it can generate revenues and incur expenses in daily activities; (2) the Group’s management can regularly evaluate its operating results to determine the resources to be allocated to it and assess its performance; (3) the Group can obtain the financial position, operating results, cash flow and other accounting information of the constituent part.

Reporting segments of the Group include:

1. The businesses of Dongyang LeTV Flower Film & TV Co., Ltd. shall be the reporting segment for distribution of films & TV plays;

2. The businesses of Leshi Zhixin Electronic Technology (Tianjin) Limited and LeTV E-commerce (Beijing) Co., Ltd. shall be the reporting segment for terminal business;

3. Businesses other than distribution of films & TV plays and terminal business shall be the reporting segment for Internet service;

4. The business of Chongqing Letv Microcredit Co., Ltd. shall be the reporting segment for loan business.

Accounting policies for business segments of the Group are the same as the Group’s major accounting policies.

• (2) Financial information about reporting segments

Unit: RMB

Distribution of Eliminations Items films & TV plays Terminal business Internet service Loan business among segments Total Operating revenue 266,586,735.92 20,980,258,514.78 10,375,210,355.17 38,455,067.27 -9,673,632,181.77 21,986,878,491.37 Operating cost 90,347,033.36 20,642,683,583.25 5,131,201,971.06 21,973,135.65 -7,639,917,856.36 18,246,287,866.96 Total assets 750,617,174.76 10,880,700,191.70 33,271,961,208.29 822,863,821.84 -13,492,316,387.52 32,233,826,009.07 Total liabilities 135,499,775.02 11,680,687,332.27 19,617,042,188.42 524,197,651.96 -10,205,353,678.16 21,752,073,269.51

• (3) If the Company has no reporting segment or the total assets and total liabilities of the reporting segments cannot be disclosed, please explain the reason

• (4) Other descriptions

• Other important transactions and events affecting investors’ decision-making

• (1) Waiver of control over LeTV E-commerce (Beijing) Co., Ltd.

In 2015 the Company held 30% equity and 67% voting rights of LeTV E-commerce (Beijing) Co., Ltd. (hereinafter referred to as “E-commerce”), so E-commerce was included in the scope of the consolidated financial statements. In October 2016 the Company transferred 15% equity held by it in

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APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

E-commerce to Lerong Holdings (Beijing) Co., Ltd., after which the Company held 15% equity in E-commerce. On December 24th, 2016, E-commerce held a general meeting and changed the articles of association that the Company directly or indirectly holds 5% equity originally, that is, exercises 67% rights, as follows: the resolution made by the general meeting regarding amendment to the articles of association and increase or decrease of registered capital and resolution regarding merger, split-off, dissolution or transformation of the Company should be approved by shareholders representing more than two-thirds of the voting rights and other matters should be approved by shareholders representing more than half of the voting rights. Therefore, the Company lost control over E-commerce.

On December 26th, 2016, E-commerce registered the amendment to the articles of association with the industry and commerce authority. The Company lost control over E-commerce. In 2016, the income statement of E-commerce was still included in the consolidation scope. The balance sheet was no longer included in the consolidation scope at the end of the period and the increased interests resulting from waiver of the equity were recognized as current capital reserves.

On March 10th, 2017, the Company issued an announcement regarding waiver of control in the subsidiary and change in consolidation scope of the financial statements and briefly described the change of equity of E-commerce and the necessity of waiver of control as well as the effect on the Company’s connected transactions and financial statements after the waiver. Meanwhile, the Company announced the resolution of the 35th meeting of the 3rd Board of Directors and audited and approved the Proposal on Waiver of Controlling Interests in the Subsidiary .

(2) Major asset restructuring

On May 6th, 2016, the Company held the 18th meeting of the 3rd Board of Directors and deliberated and approved the Proposal on Scheme regarding Asset Purchase and Fund Raising by Issuance of Shares and Payment with Cash and Connected Transactions and other proposals relating to acquisition of Le Vision Pictures.

On November 8th, 2016, the Company held the 32nd meeting of the 3rd Board of Directors and deliberated and approved the Proposal on Continued Promotion of Major Asset Restructuring Projects . The Company was approved to continue to promote major asset restructuring.

On April 14th, 2017, the Company issued an announcement regarding progress of the major asset restructuring (announcement No. 2017-041): as at the date when the announcement was issued, the Company, together with the parties to the restructuring and intermediaries such as independent financial advisers, auditors, appraisers, legal advisers, etc. actively promoted the restructuring, carried out new auditing and appraisal work by setting December 31st, 2016 as the base date of auditing and appraisal, and renegotiated with the counterparties on the restructuring plan. The Company now plans to hold a meeting of the Board of Directors recently to deliberate the major asset restructuring and announce a new restructuring plan.

(3) Changes in the sales model of Leshi Zhixin Electronic Technology (Tianjin) Limited in the current period

The Company held a meeting of the strategic committee of the 3rd Board of Directors on March 2nd, 2016. Given hot sale of Super TVs, it resolved to change its sales model for the purpose of more

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FINANCIAL INFORMATION OF LESHI INTERNET

centralized and unified management of Leshi Zhixin’s customer resources, namely, change from sale by Leshi Zhixin Electronic Technology (Tianjin) Limited (hereinafter referred to as Leshi Zhixin) to sale by cooperation with Lepa Marketing Services (Beijing) Co., Ltd. (hereinafter referred to as Lepa) in ecological construction. That is, LE sells its TVs to Lepa and Lepa then sells them to others. In the current period, a competitive price based on negotiation between the two parties was set for Lepa. To better integrate the quality resources of the upstream and downstream of smart terminal industry chain, in 2016, the Company and its connected party jointly established LeTV Smart Terminal Science & Technology Co., Ltd. (hereinafter referred to as Smart Terminal) in Shenzhen. To better reflect the function and value of the head office of Smart Terminal, all the smart terminal products of LeEco are first sold to Smart Terminal before they are sold to Lepa and E-commerce. The sales prices for Leshi Zhixin and Smart Terminal are determined based on the principle for Lepa.

(4) Plan for issuance of bonds

The Company’s fourth extraordinary general meeting 2016 deliberated and approved the Proposal on Issuance of Corporate Bonds . The contents are as follows: to meet the Company’s capital demand for long-term development, the Company kept expanding financing channels, including equity financing and debt financing. The Company plans to issue corporate bonds of not more than RMB3 billion (inclusive). The bonds to be issued have an expected term of not more than five years and will mainly be used for adjusting debt structure or supplementing working capital. The proposal on issuance of bonds is being actively implemented.

8. Others

XVII. Notes to major items in the financial statements of the parent company

1. Accounts receivable

• (1) Disclosure of accounts receivable by category

Unit: RMB

Category			Ending balance	Ending balance	Ending balance					Opening balance	Opening balance
	Book balance		**Provision for **		**bad **	debts		Book balance		**Provision for **	**bad **	debts
				Withdrawal						Withdrawal
	**Amount **	Percentage	Amount		percentage		Book value	**Amount **	Percentage	Amount	percentage		Book value
Accounts receivables for which
the provision for bad debts is
withdrawn by combination of
credit risk features	5,583,846,396.55	100.00%	330,755,958.09			5.92%	5,253,090,438.46	3,711,022,194.23	100.00%	169,475,404.68		4.57%	3,541,546,789.55
Total	5,583,846,396.55	100.00%	330,755,958.09				5,253,090,438.46	3,711,022,194.23	100.00%	169,475,404.68			3,541,546,789.55

Accounts receivable whose amount is significant individually and for which provision for bad debts is withdrawn individually by the end of the period:

• Applicable � Not Applicable

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APPENDIX II

Accounts receivable for which provision for bad debts is withdrawn as per aging analysis method in portfolio:

� Applicable □ Not Applicable

Unit: RMB

Age

Ending balance Accounts receivable Provision for bad debts Withdrawal percentage

Within 1 year
(sub item)
Within 1 year
(subtotal)	3,828,594,519.68	114,857,835.59	3.00%
1-2 years	823,450,455.26	82,345,045.53	10.00%
2-3 years	280,643,996.60	70,160,999.15	25.00%
3-4 years	102,908,889.84	51,454,444.92	50.00%
4-5 years	23,875,265.80	11,937,632.90	50.00%
Over 5 years	0.00	0.00	100.00%
Total	5,059,473,127.18	330,755,958.09

Basis for determining the portfolio:

Accounts receivable for which provision for bad debts is withdrawn as per balance percentage method in portfolio:

□ Applicable � Not Applicable

Other accounts receivable for which provision for bad debts is withdrawn as per other methods in portfolio:

Ending balance Category Accounts receivable Provision for bad debts Withdrawal percentage (%) Accounts receivable by subsidiaries in the consolidation scope 524,373,269.37 0.00 0.00 Total 524,373,269.37 0.00 0.00

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FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (2) Provision for bad debts withdrawn, recovered or reversed in the current period

In the current period, the provision for bad debts withdrawn amounted to RMB161,280,553.41, and the provision for bad debts recovered or reversed was RMB0.00.

• (3) Accounts receivable actually written off in the current period

• (4) Top five balances of accounts receivable by debtor at the end of the period

This year, the top five balances of accounts receivable by debtor at the end of the year totaled RMB731,414,700.03, accounting for 13.10% of the total balance of accounts receivable at the end of the year, and the balance of corresponding provision for bad debts withdrawn at the end of the year was RMB27,369,743.73.

1. Other receivables

2. (1) Disclosure of other receivables by category

Unit: RMB

			Ending balance	Ending balance					Opening balance
Category	Book balance		**Provision for bad **		debts		Book balance		Provision for bad debts
				Withdrawal						Withdrawal
	Amount Percentage		Amount	percentage		Book value	Amount Percentage		Amount	percentage	Book value
Other receivables for which the
provision for bad debts is
withdrawn by combination of
credit risk features	5,322,917,617.74	100.00%	15,508,551.70		0.29%	5,307,409,066.04	2,632,694,855.08	100.00%	1,037,009.98	0.04%	2,631,657,845.10
Total	5,322,917,617.74	100.00%	15,508,551.70		0.29%	5,307,409,066.04	2,632,694,855.08	100.00%	1,037,009.98		2,631,657,845.10

Other receivables whose amount is significant individually and for which provision for bad debts is withdrawn individually by the end of the period:

• Applicable � Not Applicable

Other receivables for which provision is for bad debts withdrawn as per aging analysis method in portfolio:

• Applicable □ Not Applicable

Unit: RMB

		Ending balance
		Provision for	Withdrawal
Age	Other receivables	bad debts	percentage
Within 1 year (sub item)
Within 1 year (subtotal)	474,590,797.96	14,237,723.94	3.00%
1-2 years	5,731,086.64	573,108.66	10.00%
2-3 years	1,708,192.82	427,048.21	25.00%
3-4 years	541,341.78	270,670.89	50.00%
4-5 years	0.00	0.00	50.00%
Over 5 years	0.00	0.00	100.00%
Total	482,571,419.20	15,508,551.70

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APPENDIX II

Basis for determining the portfolio:

Other receivables for which provision for bad debts is withdrawn as per balance percentage method in portfolio:

□ Applicable � Not Applicable

Other receivables for which provision for bad debts is withdrawn as per other methods in portfolio:

• Applicable □ Not Applicable

Ending balance Category Other receivables Provision for bad debts Receivables by subsidiaries in the consolidation scope 4,746,183,676.21 0.00 Petty cash and equity incentive 94,162,522.33 0.00 Total 4,840,346,198.54 0.00	Withdrawal percentage (%) 0.00 0.00
	0.00

• (2) Provision for bad debts withdrawn, recovered or reversed in the current period

In the current period, the provision for bad debts withdrawn amounted to RMB14,471,541.72, and the provision for bad debts recovered or reversed was RMB0.00.

Important amount of provision for bad debts reversed or recovered in the current period:

None

• (3) Other receivables actually written off in the current period

None

• (4) Other receivables classified by nature of payment

		Unit: RMB
	Ending book	Opening book
Nature of payment	balance	balance
Current account	5,176,820,064.04	2,607,529,034.81
Petty cash, deposit and equity incentive	146,097,553.70	25,165,820.27
Total	5,322,917,617.74	2,632,694,855.08

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FINANCIAL INFORMATION OF LESHI INTERNET

• (5) Top five balances of other receivables by debtor at the end of the period

					Unit: RMB
				Percentage in
				total balance of	Balance of
				other receivables	provision for bad
	Nature of			at the end of the	debts at the end
Name of entity	payment	Ending balance	Age	period	of the period
LeTV Information
Technology (Tianjin)	Transactions with
Co., Ltd.	connected parties	1,629,385,887.63	0-3 years	30.61%	0.00
Letv Information
Technology (Tibet) Co.,	Transactions with
Ltd.	connected parties	1,212,020,494.72	Within 1 year	22.77%	0.00
Beijing LeTV Streaming
Media Advertising Co.,	Transactions with
Ltd.	connected parties	1,000,163,329.00	Within 1 year	18.79%	0.00
Khorgos Letv New
Generation Culture	Transactions with
Media Co., Ltd.	connected parties	687,311,983.13	Within 1 year	12.91%	0.00
LeTV E-commerce	Call loans with
(Beijing) Co., Ltd.	connected parties	430,586,764.30	Within 1 year	8.09%	12,917,602.93
Total	—	4,959,468,458.78	—	93.17%	12,917,602.93

1. Long-term equity investment

2. (1) Classification of long-term equity investment

Unit: RMB

		Ending balance	Ending balance		Opening balance	Opening balance
		Provision for			Provision for
Items	Book balance	impairment	Book value	Book balance	impairment	Book value
Investment in
subsidiaries	3,841,031,113.34	0.00	3,841,031,113.34	3,129,314,897.13	0.00	3,129,314,897.13
Investment in
associated
enterprises
and joint
ventures	10,279,428.05	0.00	10,279,428.05	10,045,254.04	0.00	10,045,254.04
Total	3,851,310,541.39		3,851,310,541.39	3,139,360,151.17		3,139,360,151.17

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APPENDIX II

(2) Investment in subsidiaries

Unit: RMB

					Provision	Balance of
					withdrawn for	provision for
					impairment in	impairment at
		Increase in the	Decrease in the		the current	the end of the
Invested entity	Opening balance	current period	**current period **	Ending balance	period	period
LeTV Information
Technology
(Shanghai) Co.,
Ltd.	500,000.00	0.00	0.00	500,000.00	0.00	0.00
LeTV Information
Technology
(Tianjin) Co.,
Ltd.	367,021,142.55	0.00	0.00	367,021,142.55	0.00	0.00
LeTV Cultural
Development
(Beijing) Co.,
Ltd.	5,100,000.00	0.00	0.00	5,100,000.00	0.00	0.00
Letv Information
Technology
(Hong Kong)
Co., Ltd.	511,905,733.74	362,366,778.87	0.00	874,272,512.61	0.00	0.00
Dongyang LeTV
Flower Film &
TV Co., Ltd.	899,999,997.89	0.00	0.00	899,999,997.89	0.00	0.00
Khorgos Letv
New
Generation
Culture Media
Co., Ltd.	10,000,000.00	0.00	0.00	10,000,000.00	0.00	0.00
Chongqing Letv
Microcredit
Co., Ltd.	0.00	300,000,000.00	0.00	300,000,000.00	0.00	0.00
LeTV Fortune
(Beijing)
Information
Technology
Co., Ltd.	0.00	700,000.00	0.00	700,000.00	0.00	0.00
Leshi Zhixin
Electronic
Technology
(Tianjin)
Limited	628,057,434.53	38,136,178.06	0.00	666,193,612.59	0.00	0.00

— 453 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Invested entity Beijing LeTV Streaming Media Advertising Co., Ltd. LeTV New Media Culture (Tianjin) Co., Ltd. LeCloud Computing Co., Ltd. Total	Opening balance 3,000,000.00 299,999,983.30 403,730,605.12 3,129,314,897.13	Increase in the current period Decrease in the current period 0.00 0.00 0.00 0.00 10,513,259.28 0.00 711,716,216.21	Ending balance Provision withdrawn for impairment in the current period Balance of provision for impairment at the end of the period 3,000,000.00 0.00 0.00 299,999,983.30 0.00 0.00 414,243,864.40 0.00 0.00 3,841,031,113.34 0.00	Ending balance Provision withdrawn for impairment in the current period Balance of provision for impairment at the end of the period 3,000,000.00 0.00 0.00 299,999,983.30 0.00 0.00 414,243,864.40 0.00 0.00 3,841,031,113.34 0.00
				0.00

• (3) Investment in associated enterprises and joint ventures

Unit: RMB

Invested entity I. Joint ventur II. Associated enterprises Beijing Zhiyi Information Technology Co., Ltd. Subtotal Total	Opening balance es 10,045,254.04 10,045,254.04 10,045,254.04	Investment added 0.00	Increase/decrea Investment reduced Investment gains/losses recognized based on equity method Adjustments to other consolidated revenue 0.00 234,174.01 0.00	se in the cu Other equity changes d 0.00	rrent period Cash ividends or profits announced to be distributed Provision withdrawn for impairment 0.00 0.00	Others 0.00	Ending balance Balance of provision for impairment at the end of the period 10,279,428.05 10,279,428.05 10,279,428.05 0.00	Ending balance Balance of provision for impairment at the end of the period 10,279,428.05 10,279,428.05 10,279,428.05 0.00
								0.00

— 454 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Operating revenue and cost

Unit: RMB

Items Main businesses Total	Amount incurred in the current period Revenue Cost 5,239,131,213.57 2,584,571,147.94 5,239,131,213.57 2,584,571,147.94	Amount incurred in the previous period Revenue Cost 3,965,860,728.81 2,210,010,104.53 3,965,860,728.81 2,210,010,104.53	Amount incurred in the previous period Revenue Cost 3,965,860,728.81 2,210,010,104.53 3,965,860,728.81 2,210,010,104.53
			2,210,010,104.53

1. Investment revenue

		Unit: RMB
	Amount incurred in	Amount incurred in
Items	the current period	the previous period
Revenue from long-term equity investment stated
by equity method	234,174.01	45,254.04
Revenue from disposal of long-term equity
investment	0.00	0.00
Revenue from holding financial assets measured
at fair value with changes stated as current
gains/losses	0.00	0.00
Revenue from disposing financial assets
measured at fair value with changes stated as
current gains/losses	0.00	0.00
Revenue from holding held-to-maturity
investment	0.00	0.00
Revenue from holding available-for-sale financial
assets	0.00	0.00
Revenue from disposing available-for-sale
financial assets	0.00	14,165,684.11
Gains of remaining equity re-measured at fair
value after control right loss	0.00	0.00
Total	234,174.01	14,210,938.15

1. Others

XVIII. Supplementary information

1. Schedule of non-recurring gains/losses in the current period

2. Applicable □ Not Applicable

— 455 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Unit: RMB

Items Gains/losses from disposal of non-current assets Government subsidies stated as current gains/losses (except for those closely related to company business and gained at a fixed amount or quantity according to national standard) Fund possession fee collected from non-financial enterprises and stated as current gain/loss Non-operating revenue and expenses other than the above Less: Effect of income tax Effect of minority interests Total	Amount -35,423,474.44 46,253,493.79 554,450.56 -1,231,085.00 -449,226.18 389,149.91 10,213,461.18	Description
		—

The Company should explain those non-recurring gains/losses defined according to the Explanatory Announcement No. 1 on Information Disclosure for Companies Offering Their Securities to the Public — Non-recurring Gains/Losses (the “Explanatory Announcement”) and explain the reason for defining those non-recurring gains/losses listed in the Explanatory Announcement as recurring gains/losses.

□ Applicable � Not Applicable

2. Return on equity and earnings per share

		**Earnings **	per share
		Basic earnings	Diluted earnings
	Weighted average	per share	**per **	share
Profit in the reporting period	ROE	(RMB/share)	(RMB/share)
Net profit attributable to common
shareholders	8.20%	0.29		0.29
Net profit attributable to common
shareholders after deducting
non-recurring gains/losses	8.05%	0.29		0.28

— 456 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

1. Accounting data differences under domestic and overseas accounting standards

2. (1) Differences in net profit and net assets in the financial report disclosed in accordance with international accounting standards as well as PRC accounting standards

□ Applicable � Not Applicable

• (2) Differences in net profit and net assets in the financial report disclosed in accordance with overseas accounting standards as well as PRC accounting standards

□ Applicable � Not Applicable

• (3) Reasons for accounting data differences under domestic and overseas accounting standards (if difference adjustment is made to the data audited by an overseas audit institution, the name of the overseas institution should be specified)

• Others

Section XII List of Documents for Reference

• I. Text of financial report bearing signatures and seals of legal representative Mr. Jia Yueting, person in charge of accounting and person in charge of accounting institution.

• II. Original of audit report bearing seal of the accounting firm and signatures and seals of certified public accountants.

• III. Original of annual report 2016 bearing signature of the Company’s legal representative Mr. Jia Yueting.

• IV. Other relevant information.

Place for keeping the abovementioned documents for reference: securities department of the Company.

— 457 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• D. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF LESHI INTERNET FOR THE FIRST QUARTER ENDED 31 MARCH 2017

Full Text of the Report of Leshi Internet Information & Technology Corp (Beijing) for the First Quarter of 2017

Section Two Company Profile

I. Key financial data and financial indicators

Whether retroactive adjustments or restatements would be made by the Company to the accounting data for the previous years due to changes in accounting policies and corrections in accounting errors

□ Yes � No

			Increase/decrease
			during the
			reporting period
			as compared to
		The corresponding	the corresponding
	The reporting	period of the	period of the
	period	previous year	previous year
Total Operating Revenue (RMB)	4,922,418,196.26	4,634,512,164.20	6.21%
Net profit attributable to shareholders
of the listed company (RMB)	124,792,016.84	114,739,272.68	8.76%
Net profit attributable to shareholders
of the listed company, net of
non-recurring gain or loss (RMB)	102,013,132.38	114,781,313.32	-11.12%
Net cash flow generated from
operating activities (RMB)	-741,173,904.65	64,572,457.72	-1,247.82%
Basic earnings per share (RMB/share)	0.06	0.06	0.00%
Diluted earnings per share
(RMB/share)	0.06	0.06	0.00%
Weighted average return on net assets	1.21%	2.88%	-1.67%

— 458 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Increase/decrease at the end of the reporting period As at the end of as compared to the reporting As at the end of the end of the period the previous year previous year Total assets (RMB) 33,582,885,584.50 32,233,826,009.07 4.19% Net assets attributable to shareholders of the listed company (RMB) 13,618,586,252.32 10,225,568,291.84 33.18% Items and amounts of non-recurring gain or loss � Applicable □ Not applicable

Unit: RMB

For the period from the beginning of the year to the end of the Reporting Items Period Description

Government subsidy included in profit and loss for the period, except for those closely relevant to normal business of the company, conformed to requirements of State policy, granted on fixed amount basis or enjoyed on continuous fixed amount basis subject to certain standards Non-operating income and expenses other than the above items Other gain or loss that fall within the definition of non-recurring items Less: Effect of income tax Effect of non-controlling interest (net of tax) Total

23,824,799.30 Tax rebates -283,312.27 -500,000.00 Donations -10,000.00 272,602.57 22,778,884.46 —

Notes for the Company’s non-recurring gain or loss items as defined in “the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 - Non-recurring Gains or Losses” and the non-recurring gain or loss items as illustrated in “the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 - Non-recurring Gains or Losses” defined as its recurring gain or loss items

• Applicable � Not applicable

— 459 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

No non-recurring gain or loss items as defined or illustrated in “the Explanatory Announcement on Information Disclosure for Companies Offering Their Securities to the Public No.1 - Non-recurring Gains or Losses” were defined by the Company as its recurring gain or loss items during the reporting period.

SECTION 4 FINANCIAL STATEMENTS

I. FINANCIAL STATEMENTS

1. COMBINED BALANCE SHEETS

Prepared by: 樂視網信息技術（北京）股份有限公司
(Leshi Internet Information & Technology Corp (Beijing)		31 March	2017	Unit: RMB
				Balance at
	Balance at the end			the beginning
Items		of the period		of the period
Current assets:
Currency capital	3,657,615,668.08		3,669,146,356.08
Provisions for settlement
Loans
Financial assets measured at fair value with
changes accounted for with changes accounted
for through current profit and loss
Derivative financial assets
Bills receivables		202,873,904.34		5,884,729.45
Accounts receivables	9,537,282,766.53		8,685,855,147.64
Prepayments		635,962,170.60		619,331,275.54
Insurance premium receivables
Reinsurance premium receivables
Reinsurance contract reserve
Interest receivables		21,814,398.29		18,110,043.99
Dividend receivables
Other receivables		283,440,706.18		696,016,127.29
Financial assets purchased under agreements to
resell
Inventory	1,368,837,455.39			945,179,396.74
Classified as assets held for sale
Non-current assets expiring within one year
Other current assets		428,238,298.17	1,229,643,291.40
Total current assets	16,136,065,367.58		15,869,166,368.13

— 460 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

		Balance at
	Balance at the end	the beginning
Items	of the period	of the period
Non-current assets:
Release of loans and advances	590,840,160.85	714,141,820.24
Financial assets available for sale	1,692,631,521.49	1,690,529,135.86
Held-to-maturity investment
Long-term receivables
Long-term equity investment	2,073,200,290.82	2,070,302,115.59
Investment property
Fixed assets	1,178,101,662.29	1,140,315,635.02
Construction-in-progress
Engineering supplies
Disposal of fixed assets
Capitalized biological assets
Oil and gas assets
Intangible assets	7,904,165,566.48	6,882,018,054.48
Development expenses	757,836,243.44	696,578,154.59
Goodwill	747,585,265.47	747,585,265.47
Long-term expenses to be amortized	1,544,969.26	1,546,403.16
Deferred income tax assets	838,852,706.37	763,343,422.11
Other non-current assets	1,662,061,830.45	1,658,299,634.42
Total non-current assets	17,446,820,216.92	16,364,659,640.94
Total assets	33,582,885,584.50	32,233,826,009.07

— 461 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

		Balance at
	Balance at the end	the beginning
Items	of the period	of the period
Current liabilities:
Short-term borrowings	2,177,675,908.18	2,600,361,000.00
Loans from the Central Bank
Customer bank deposits and due to banks and
other financial institutions
Loans received
Financial liabilities measured at fair value with
changes accounted for through current profit
and loss
Derivative financial liabilities
Bills payables	125,000,000.00	226,884,006.72
Accounts payables	4,835,548,546.50	5,421,247,492.09
Receipts in advance	203,648,054.14	182,669,921.06
Proceeds from repurchase of financial assets	264,927,000.00	409,140,706.62
Service charge and commissions payables e
Employees remuneration payables	16,383,631.17	9,609,937.09
Tax payables	940,127,783.91	774,198,911.49
Interest payables	112,643,447.69	81,875,727.03
Dividend payables	25,850,903.00	25,850,903.00
Other payables	945,436,802.45	105,029,678.68
Reinsurance premium payables
Insurance contract reserves
Securities dealing brokerage deposits
Securities underwriting brokerage deposits
Liabilities classified as held for sale
Non-current liabilities expiring within one year	1,979,522,171.39	2,646,401,713.50
Other current liabilities	2,267,490.45
Total current liabilities	11,629,031,738.88	12,483,269,997.28

— 462 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

				Balance at
			Balance at the end	the beginning
Items			of the period	of the period
Non-current liabilities:
Long-term borrowings			3,013,443,703.22	3,024,445,808.89
Bonds payables
Include: Preference shares
Perpetual bonds
Long-term payables			172,245,672.69	142,094,227.63
Long-term employees’ remuneration payables
Specific payables
Accrued liabilities
Deferred gains			612,687,389.64	483,948,010.67
Deferred income tax liabilities			3,037,852.42	3,037,852.42
Other non-current liabilities			3,355,277,372.62	5,615,277,372.62
Total non-current liabilities			7,156,691,990.59	9,268,803,272.23
Total liabilities			18,785,723,729.47	21,752,073,269.51
Owners’ equity:
Share capital			1,994,720,096.00	1,981,680,127.00
Other equity instruments
Include: Preference shares
Perpetual bonds
Capital reserve			9,455,543,478.23	6,197,235,638.19
Less: Treasury stocks
Other comprehensive income			51,649,762.29	54,771,627.69
Specific reserves
Surplus reserves			286,311,762.59	286,311,762.59
General risk provisions
Undistributed profit			1,830,361,153.21	1,705,569,136.37
Total owners’ equity attributable to parent
company			13,618,586,252.32	10,225,568,291.84
Minority interests			1,178,575,602.71	256,184,447.72
Total owners’ equity			14,797,161,855.03	10,481,752,739.56
Total of liabilities and owners’ equity			33,582,885,584.50	32,233,826,009.07
Legal representative:	Chief	accounting	officer: Accounting firm officer:
Jia Yueting		Yang Lijie	Li	Yongchao

— 463 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

2. BALANCE SHEET OF PARENT COMPANY

Unit: RMB

		Balance at
	Balance at the end	the beginning
Items	of the period	of the period
Current assets:
Currency capital	249,059,634.69	1,116,976,098.00
Financial assets measured at fair value with
changes accounted for through current profit
and loss
Derivative financial assets
Bills receivables	6,500,000.00	500,000.00
Accounts receivables	5,730,229,691.72	5,253,090,438.46
Prepayments	174,146,877.37	48,732,195.32
Interest receivables
Dividend receivables
Other receivables	7,171,167,190.57	5,307,409,066.04
Inventory	31,898,737.06	26,739,708.87
Classified as assets held for sale
Non-current assets expiring within one year
Other current assets	58,867,159.48	68,084,088.58
Total current assets	13,421,869,290.89	11,821,531,595.27
Non-current assets:
Financial assets available for sale	76,581,116.97	76,581,116.97
Held-to-maturity investment
Long-term receivables
Long-term equity investment	3,732,128,554.87	3,851,310,541.39
Investment property
Fixed assets	268,168,012.43	287,840,432.86
Work-in-progress
Construction materials
Disposal of fixed assets
Capitalized biological assets
Gasoline assets
Intangible assets	2,219,420,187.16	2,117,604,688.60
Development expenses	144,265,384.93	79,741,741.33
Goodwill
Long-term expenses to be amortized
Deferred income tax assets	53,298,607.38	53,298,607.38
Other non-current assets	715,589,302.22	722,659,989.63
Total non-current assets	7,209,451,165.96	7,189,037,118.16
Total assets	20,631,320,456.85	19,010,568,713.43

— 464 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

		Balance at
	Balance at the end	the beginning
Items	of the period	of the period
Current liabilities:
Short-term borrowings	2,161,561,000.00	2,505,361,000.00
Financial liabilities measured at fair value with
changes accounted for through current profit
and loss
Derivative financial liabilities
Bills payables	125,000,000.00	226,884,006.72
Accounts payables	1,007,832,667.85	1,036,681,687.40
Receipts in advance	17,758,524.55	9,511,420.22
Employees remuneration payables	421,660.59	820,726.71
Tax payables	965,492,480.45	638,652,615.76
Interest payables	95,011,280.21	67,879,476.17
Dividend payables	25,850,903.00	25,850,903.00
Other payables	1,860,655,766.14	1,383,821,401.45
Liabilities classified as held for sale
Non-current liabilities expiring within one year	1,979,522,171.39	2,280,323,284.84
Other current liabilities	2,267,490.45
Total current liabilities	8,241,373,944.63	8,175,786,522.27
Non-current liabilities:
Long-term borrowings
Bonds payables
Include: Preference shares
Perpetual bonds
Long-term payables	61,576,270.04	75,651,634.84
Long-term employees’ remuneration payables
Specific payables
Accrued liabilities
Deferred gains	2,428,678.40	3,244,493.96
Deferred income tax liabilities	3,037,852.42	3,037,852.42
Other non-current liabilities	6,336,372.62	436,336,372.62
Total non-current liabilities	73,379,173.48	518,270,353.84
Total liabilities	8,314,753,118.11	8,694,056,876.11

— 465 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Items Balance at the end of the period Owners’ equity: Share capital 1,994,720,096.00 Other equity instruments Include: Preference shares Perpetual bonds Capital reserve 5,729,419,629.13 Less: Treasury stocks Other comprehensive income Specific reserves Surplus reserves 286,311,762.59 Undistributed profit 4,306,115,851.02 Total owners’ equity 12,316,567,338.74 Total of liabilities and owners’ equity 20,631,320,456.85	Balance at the beginning of the period 1,981,680,127.00 5,666,254,667.15 286,311,762.59 2,382,265,280.58
	10,316,511,837.32
	19,010,568,713.43

3. COMBINED INCOME STATEMENT

Unit: RMB

Amount incurred Amount incurred Items in the period in the prior period I. Total Operating Revenue 4,922,418,196.26 4,634,512,164.20 Include: Operating revenue 4,906,428,614.52 4,634,512,164.20 Interest income 15,989,581.74 Earned premium Income from handling fee and commission II. Total Operating Cost 4,697,367,056.88 4,511,663,722.95 Include: Operating cost 3,573,190,570.93 3,909,094,399.00 Interest expenses 8,058,489.67 Expenses on service charge and commission Surrendered value Claims paid, net Net insurance contract reserves withdrawn Expenses on policy dividend Expenses on reinsurance Tax and surcharges 15,417,466.24 12,013,744.15 Sales expenses 830,047,756.53 386,692,167.42 Administration expenses 148,010,853.76 116,448,872.38 Finance expenses 123,811,195.21 87,414,540.00

— 466 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

		Amount incurred	Amount incurred
Items		in the period	in the prior period
	Loss on impairment of assets	-1,169,275.46
	Add: Gain on change in fair value (loss to be
	stated with “-”)
	Gain on investment (loss to be stated with “-”)	14,093,627.93	-20.79
	Include: Gain on investment in affiliated
	enterprises and joint ventures (loss to be
	stated with “-”)	14,093,627.93	-20.79
	Gain on exchange (loss to be stated with “-“))
III.	Operating profit (loss to be stated with “-”)	239,144,767.31	122,848,420.46
	Add: Non-operating revenue	23,824,799.30	102,963.92
	Include: Gain on disposal of non-current
	assets
	Less: Non-operating expenses	783,312.27	136,303.00
	Include: Loss on disposal of non-current assets
IV.	Total profit (total loss to be stated with “-”))	262,186,254.34	122,815,081.38
	Less: Income tax charges	262,534,959.41	43,785,111.24
V.	Net profit (net loss to be stated with “-”)	-348,705.07	79,029,970.14
	Net loss of owner attributable to parent
	company	124,792,016.84	114,739,272.68
	Minority interest	-125,140,721.91	-35,709,302.54
VI.	Other net comprehensive income after tax	-3,121,865.40	-8,058,486.38
	Other net comprehensive income after tax
	attributable to the owner of parent company	-3,121,865.40	-8,058,486.38
	(1) Other comprehensive income not subject to
	reclassification to profit and loss and loss in
	future
	1. Changes in net liabilities or net assets from
	re-measurement of defined benefit plans
	2. Shares enjoyed in other comprehensive
	income not subject to reclassification to
	profit and loss in investee companies under
	equity law
	(2) Other comprehensive income to be
	reclassified to profit and loss in future	-3,121,865.40	-8,058,486.38
	1. Shares enjoyed in other comprehensive
	income to be reclassified to profit and loss
	in investee companies under equity law
	2. Profit and loss relating to change in fair
	value of financial assets available for sale	-18,034,543.83	-3,743,738.12

— 467 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		Amount incurred	Amount incurred
Items		in the period	in the prior period
3.	Profit and loss relating to held-to-maturity
	investment reclassified as available-for-sale
	financial assets
4.	Effective part of profit and loss on hedge of
	cash flow
5.	Conversion difference of foreign currency
	statement	14,912,678.43	-4,314,748.26
6.	Others
Other net comprehensive income after taxation
	attributable to the minority shareholders
VII. Total comprehensive income		-3,470,570.47	70,971,483.76
Total comprehensive income attributable to the
	shareholders of parent company	121,670,151.44	106,680,786.30
Total comprehensive income attributable to the
	minority shareholders	-125,140,721.91	-35,709,302.54
VIII. Earnings per share:
(1) Basic earnings per share		0.06	0.06
(2) Diluted earnings per share		0.06	0.06

The net profit realized on consolidation of enterprises under common control and of the acquiree before tax for the period is RMB0.00, while the net profit of the acquiree realized for the prior period was RMB0.00.

Legal representative: Chief accounting officer: Accounting firm officer: Jia Yueting Yang Lijie Li Yongchao

— 468 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

4. INCOME STATEMENT OF PARENT COMPANY

			單位：元
		Amount incurred	Amount incurred
Items		in the period	in the prior period
I.	Operating Revenue	833,711,174.31	1,306,915,064.12
	Less: Operating cost	592,892,093.23	657,154,703.17
	Tax and surcharges	10,628,175.89	10,424,493.20
	Sales expenses	17,087,581.49	184,846,373.85
	Administration expenses	64,830,418.80	75,152,497.75
	Finance expenses	75,140,389.15	69,658,606.65
	Loss on impairment of assets
	Add: Gain on change in fair value (loss to be
	stated with “-”)
	Gain on investment (loss to be stated with “-”)	2,175,238,946.77	-20.79
	Include: Gain on investment in affiliated
	enterprises and joint ventures (loss to be
	stated with “-”)	66,155.03	-20.79
II.	Operating profit (loss to be stated with “-”)	2,248,371,462.52	309,678,368.71
	Add: Non-operating revenue	50,000.00
	Include: Gain on disposal of non-current
	assets
	Less: Non-operating expenses	500,000.00
	Include: Loss on disposal of non-current assets
III.	Total profit (total loss to be stated with “-”)	2,247,871,462.52	309,728,368.71
	Less: Income tax charges	324,020,892.08	42,098,700.63
	IV. Net profit (total loss to be stated with “-”)	1,923,850,570.44	267,629,668.08
	V. Other net comprehensive income after tax
	(1) Other comprehensive income not subject to
	reclassification to profit and loss and loss in
	future
	1. Changes in net liabilities or net assets from
	re-measurement of defined benefit plans
	2. Shares enjoyed in other comprehensive
	income not subject to reclassification to
	profit and loss in investee companies under
	equity law

— 469 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Items

Amount incurred Amount incurred in the period in the prior period

• (2) Other comprehensive income to be reclassified to profit and loss in future

• Shares enjoyed in other comprehensive income to be reclassified to profit and loss in investee companies under equity law

• Profit and loss relating to change in fair value of financial assets available for sale

• Profit and loss relating to held-to-maturity investment reclassified as available-for-sale financial assets

• Effective part of profit and loss on hedge of cash flow

• Conversion difference of foreign currency statement

• Others

VI. Total comprehensive income 1,923,850,570.44 267,629,668.08

• VII. Earnings per share:

• (1) Basic earnings per share

• (2) Diluted earnings per share

— 470 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

5. COMBINED STATEMENT OF CASH FLOW

Unit: RMB

Items

Amount incurred Amount incurred in the period in the prior period

I.	Cash flows from operating activities
	Cash received from sale of good and service
	provided	2,630,848,829.83	2,821,414,626.26
	Net increase in deposits from customers and
	other financial institutions
	Increase in loans from the Central Bank
	Net increase of borrowings from other
	financial institutions
	Cash received from former insurance contract
	premium
	Net cash received from reinsurance business
	Net increase of insurance reserve and
	investment
	Net increase from disposal of financial assets
	measured at fair value with changes
	accounted for through current profit and loss
	Cash received from interest, service charge
	and commission	13,244,227.49
	Net increase of borrowings
	Net increase of fund from repurchases	-144,213,706.62
	Rebated taxes received	4,935,395.81
	Other operation activity related cash receipts	778,797,096.80	6,673,057.47
	Subtotal of cash flow in from operating
	activity	3,283,611,843.31	2,828,087,683.73
	Cash paid for purchase of goods and reception
	of labor services	3,226,163,987.21	2,158,124,310.16
	Net increase of loans and advances to
	customers	-124,522,356.38
	Net increase of deposits from the Central
	Bank and other institutions
	Cash for the former insurance contract
	indemnity payment
	Cash paid for interest, service charge and
	commission	4,576,481.06
	Cash paid for policy dividend
	Cash paid to and for staff	261,428,176.31	232,441,726.80
	Taxes paid	66,178,271.24	106,527,170.68
	Other business related cash payments	590,961,188.51	266,422,018.37
	Subtotal of cash flow out from operating
	activity	4,024,785,747.95	2,763,515,226.01
	Net cash flow from operating activities	-741,173,904.64	64,572,457.72

— 471 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

		Amount incurred	Amount incurred
Items		in the period	in the prior period
II.	Cash flows arising from investment activities:
	Cash received from recovery of investment	760,000,000.00
	Cash received from investment income
	Net amount of cash received from disposal of
	fixed assets, intangible assets and other
	long-term assets	21,326.84	5,134.58
	Net cash received from disposal of
	subsidiaries and other operating units
	Other investment related cash receipts	670,114,206.31	60,000,000.00
	Subtotal of cash flow in from investment
	activity	1,430,135,533.15	60,005,134.58
	Cash paid for construction/purchase of fixed
	assets, intangible assets and other long term
	assets	1,659,425,243.74	1,078,517,312.66
	Cash paid for investment	4,000,000.00
	Net increase of hypothecated loans
	Net cash received from payment by
	subsidiaries and other operating units
	Other investment related cash payments	67,000,000.00
	Subtotal of cash flow out from investment
	activities	1,726,425,243.74	1,082,517,312.66
	Net cash flow arising from investment
	activities	-296,289,710.59	-1,022,512,178.08
III.	Cash flows arising from fund raising
	activities:
	Cash received from absorption of investment	2,187,735,251.82	1,002,250,000.00
	Include.: Cash received from subsidiaries’
	minority shareholders’ investment
	Cash received from borrowings	13,114,908.18	263,287,179.49
	Cash received from bond issuing
	Other fund-raising related cash receipts	87,762,422.72
	Subtotal of cash flow in from fund raising
	activity	2,288,612,582.72	1,265,537,179.49
	Cash paid for liabilities repayment	1,191,455,412.42	368,819,321.58
	Cash paid for dividend/profit distribution or
	repayment of interest	78,580,140.78	23,284,510.08
	Including: Dividend and profit paid by
	subsidiaries to minority shareholders
	Other fund-raising related cash payments	4,788,793.77	24,469,380.17
	Subtotal of cash flow out from fund raising
	activity	1,274,824,346.97	416,573,211.83
	Net cash flow arising from fund-raising
	activities	1,013,788,235.75	848,963,967.66

— 472 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Amount incurred Amount incurred Items in the period in the prior period IV. Influence from change of exchange rate upon cash and cash equivalents 16,995.95 -1,805,115.12 V. Net increase of cash and cash equivalents -23,658,383.53 -110,780,867.82 Add: Balance of cash and cash equivalents at the beginning of the period 1,460,574,051.61 2,714,778,115.14 VI. Balance of cash and cash equivalents at the end of the period 1,436,915,668.08 2,603,997,247.32

6. COMBINED STATEMENT OF CASH FLOW OF PARENT COMPANY

Unit: RMB

		Amount incurred	Amount incurred
Items		in the period	in the prior period
II.	Cash flows from operating activities
	Cash received from sale of good and service
	provided	491,694,518.95	489,084,381.46
	Rebated taxes received
	Other operation activity related cash receipts	880,887,141.35	637,149,546.88
	Subtotal of cash flow in from operating
	activity	1,372,581,660.30	1,126,233,928.34
	Cash paid for purchase of goods and reception
	of labor services	480,931,915.52	93,383,352.93
	Cash paid to and for staff	153,445,632.88	148,828,669.98
	Taxes paid	21,455,840.95	53,896,158.49
	Other business related cash payments	851,553,870.98	114,463,247.69
	Subtotal of cash flow out from operating
	activity	1,507,387,260.33	410,571,429.09
	Net cash flow from operating activities	-134,805,600.03	715,662,499.25
II.	Cash flows arising from investment activities:
	Cash received from recovery of investment	760,000,000.00
	Cash received from investment income
	Net amount of cash received from disposal of
	fixed assets, intangible assets and other
	long-term assets	4,826.87
	Net cash received from disposal of
	subsidiaries and other operating units
	Other investment related cash receipts
	Subtotal of cash flow in from investment
	activity	760,004,826.87
	Cash paid for construction/purchase of fixed
	assets, intangible assets and other long term
	assets	463,889,569.38	278,410,436.55

— 473 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

		Amount incurred	Amount incurred
Items		in the period	in the prior period
	Cash paid for investment	459,062,110.87
	Net cash received from payment by
	subsidiaries and other operating units
	Other investment related cash payments
	Subtotal of cash flow out from investment
	activities	463,889,569.38	737,472,547.42
	Net cash flow arising from investment
	activities	296,115,257.49	-737,472,547.42
III.	Cash flows arising from fund raising
	activities:
	Cash received from absorption of investment	46,735,251.82
	Cash received from borrowings	263,287,179.49
	Cash received from bond issuing
	Other fund-raising related cash receipts	87,762,422.72
	Subtotal of cash flow in from fund raising
	activity	134,497,674.54	263,287,179.49
	Cash paid for liabilities repayment	1,088,046,844.19	368,819,321.58
	Cash paid for dividend/profit distribution or
	repayment of interest	40,322,955.33	23,284,510.08
	Other fund-raising related cash payments	4,788,793.77	16,153,380.17
	Subtotal of cash flow out from fund raising
	activity	1,133,158,593.29	408,257,211.83
	Net cash flow arising from fund-raising
	activities	-998,660,918.75	-144,970,032.34
IV.	Influence from change of exchange rate upon
	cash and cash equivalents
V.	Net increase of cash and cash equivalents	-837,351,261.29	-166,780,080.51
	Add: Balance of cash and cash equivalents at
	the beginning of the period	1,060,210,895.98	1,614,291,968.20
VI.	Balance of cash and cash equivalents at the
	end of the period	222,859,634.69	1,447,511,887.69

II. AUDITORS’ REPORT

Has the first quarterly report been audited

□ Yes � No

The first quarterly report of the company has not been audited.

— 474 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

E. DIFFERENCES BETWEEN ACCOUNTING POLICIES ADOPTED BY THE COMPANY (HKFRS) AND LESHI INTERNET (CAS)

As described in the section entitled “Letter from the Board” of this circular, the Company has applied to the Stock Exchange for, and has been granted, a waiver from the requirement to include in this circular an accountants’ report on Leshi Internet and its consolidated subsidiaries (collectively referred to as the “ Leshi Internet Group ”) in accordance with Rule 14.67(6)(a)(i) and Chapter 4 of the Listing Rules.

Instead, this circular contains a copy of the:

Financial statements of Leshi Internet for the financial year ended 31 December 2014, prepared in accordance with CAS and audited by Huapu Tianjian Certified Public Accountants, two financial years ended 31 December 2015 and 2016, prepared in accordance with CAS and audited by SHINEWING Certified Public Accountants, Beijing, the People’s Republic of China, and three months ended 31 March 2017 prepared in accordance with CAS which are unaudited (collectively referred to the “ Leshi Internet Historical Track Record Accounts ”), as set out in Appendix II to this circular (the “ Leshi Internet’s Financial Information ”).

The Leshi Internet Historical Track Record Accounts cover the financial positions of Leshi Internet Group as at 31 December 2014, 2015, 2016 and three months ended 31 March 2017 and the results of the Leshi Internet Group for each of the three years ended 31 December 2014, 2015, 2016 and three months ended 31 March 2017 (the “ Relevant Periods ”).

In particular, disclosure is set out providing:

• a) a comparison between Leshi Internet’s consolidated statements of profit or loss as extracted from the Leshi Internet’s Financial Information on the one hand (prepared in accordance with CAS), and a restatement of such consolidated statements of profit or loss and other comprehensive income had they instead been prepared in accordance with accounting policies presently adopted by the Company which are in compliance with HKFRS. The process applied in the preparation of such restatement is set out below;

• b) a comparison between Leshi Internet’s consolidated statements of financial position as extracted from the Leshi Internet’s Financial Information on the one hand (prepared in accordance with CAS), and a restatement of such consolidated statements of financial position had they instead been prepared in accordance with accounting policies presently adopted by the Company which are in compliance with HKFRS. The process applied in the preparation of such restatement is set out below; and

— 475 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• c) a discussion of the material financial statements line item differences arising out of the restatement exercise outlined in (a) and (b) above.

(the reconciliation for the Leshi Internet Historical Track Record Accounts is referred to as the “ Reconciliation Information ”)

Basis of Preparation

The Reconciliation Information as at and for the Relevant Periods restates the “Unadjusted Financial Information under CAS” of Leshi Internet as if it had been prepared in accordance with the accounting policies presently adopted by the Company which are in compliance with HKFRS.

Reconciliation Process

The Reconciliation Information has been prepared by the directors of the Company by comparing the differences between the accounting policies adopted by Leshi Internet for the Relevant Periods which are prepared in accordance with CAS, and the accounting policies presently adopted by the Company which are in compliance with HKFRS, and quantifying the relevant material financial effects of such differences, if any.

Your attention is drawn to the fact that the Reconciliation Information has not been subject to an independent audit. Accordingly, no opinion is expressed by an auditor on whether it presents a true and fair view of Leshi Internet’s financial positions as at 31 December 2014, 2015, 2016 and three months ended 31 March 2017, nor its results for each of the Relevant Periods then ended under the accounting policies presently adopted by the Company. Your attention is also drawn to the fact that the unaudited financial information does not constitute the first set of financial statements of the Leshi Internet Group prepared in accordance with HKFRS.

SHINEWING (HK) CPA Limited (“ SHINEWING Hong Kong ”) was engaged by the Company to conduct work in accordance with the Hong Kong Standard on Assurance Engagements 3000 (Revised) “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” (“ HKSAE 3000 (Revised) ”) issued by the HKICPA on the Reconciliation Information. The work consisted primarily of:

• (i) comparing the unadjusted financial information of the Leshi Internet Group set out in the column “Unadjusted Financial Information under CAS” of the Reconciliation Information with the Leshi Internet Historcial Track Record Accounts prepared under CAS as set out in the Leshi Internet Historical Track Record Accounts that has been included in the appendix II of the Circular;

• (ii) considering the adjustments made and evidence supporting the adjustments made in arriving at the “Adjusted Financial Information under the Company’s policies” also set out in the Reconciliation Information, which included examining the differences between the Leshi Internet Group’s accounting policies and the Company’s accounting policies; and

— 476 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

• (iii) checking the arithmetic accuracy of the computation of the restated amounts set out in the column “Adjusted Financial Information under the Company’s policies” of the reconciliation information.

SHINEWING Hong Kong’s engagement did not involve independent examination of any of the underlying financial information. The work carried out in accordance with HKSAE 3000 (Revised) is different in scope from an audit or review conducted in accordance with Hong Kong Standards on Auditing or Hong Kong Standards on Review Engagements issued by the HKICPA and consequently, SHINEWING Hong Kong did not express an audit opinion nor a review conclusion on the Reconciliation Information. SHINEWING Hong Kong’s engagement was intended solely for the use of the directors of the Company in connection with this circular and may not be suitable for another purpose. Based on the work performed, SHINEWING Hong Kong has concluded that:

• (i) the “Unadjusted Financial Information under CAS” as set out in the Reconciliation Information has been properly extracted from the Leshi Internet Historical Track Record Accounts;

• (ii) the adjustments reflect, in all material respects, the differences between the Leshi Internet Group’s accounting policies and the Company’s accounting policies; and

• (iii) the computation of the “Adjusted Financial Information under the Company’s policies” is arithmetically accurate.

— 477 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Unaudited Adjusted Consolidated Statements of Profit or Loss under the Company’s Policies

Notes Revenue Cost of sales Gross profit Other income and gains a,b Selling expenses Administrative expenses b Finance costs b Share of (loss) profits of an associate a Profit before tax Income tax credit (expenses) Profit for the year/period Other comprehensive income for the year/period, net of tax Items that may be reclassified subsequently to profit or loss: Fair value change of available-for- sale financial assets Exchange difference arising on translating foreign operations Total comprehensive income for the year/period Profit for the year/period attributable to: Owners of the Company Non-controlling interests Total comprehensive income for the year/period attributable to: Owners of the Company Non-controlling interests	Unadjusted Financial Information under CAS (audited) RMB’000 6,818,938 (5,884,982) 933,956 27,561 (489,035) (231,668) (167,915) — 72,899 55,897 128,796 — 499 129,295 364,029 (235,233) 128,796 364,528 (235,233) 129,295	2014 Adjustments (unaudited) RMB’000 3,833 (23,768) 20,254 (319)	Adjusted Financial Information under the Company’s policies (unaudited) RMB’000 6,818,938 (5,884,982) 933,956 31,394 (489,035) (255,436) (147,661) (319) 72,899 55,897 128,796 — 499 129,295 364,029 (235,233) 128,796 364,528 (235,233) 129,295	For the ye Unadjusted Financial Information under CAS (audited) RMB’000 13,016,725 (11,206,690) 1,810,035 123,737 (1,040,737) (469,887) (348,980) — 74,168 142,948 217,116 5,073 23,471 245,660 573,026 (355,910) 217,116 601,570 (355,910) 245,660	ar ended 31 De 2015 Adjustments (unaudited) RMB’000 6,140 (70,843) 64,658 45	cember Adjusted Financial Information under the Company’s policies (unaudited) RMB’000 13,016,725 (11,206,690) 1,810,035 129,877 (1,040,737) (540,730) (284,322) 45 74,168 142,948 217,116 5,073 23,471 245,660 573,026 (355,910) 217,116 601,570 (355,910) 245,660	Unadjusted Financial Information under CAS (audited) RMB’000 21,986,878 (18,398,863) 3,588,015 83,239 (2,365,883) (986,053) (648,027) — (328,709) 106,816 (221,893) (20,792) 47,726 (194,959) 554,759 (776,652) (221,893) 581,693 (776,652) (194,959)	2016 Adjustments (unaudited) RMB’000 (24,598) (109,120) 97,889 35,829	Adjusted Financial Information under the Company’s policies (unaudited) RMB’000 21,986,878 (18,398,863) 3,588,015 58,641 (2,365,883) (1,095,173) (550,138) 35,829 (328,709) 106,816 (221,893) (20,792) 47,726 (194,959) 554,759 (776,652) (221,893) 581,693 (776,652) (194,959)	For the three months ended 3 2017 Unadjusted Financial Information under CAS (audited) Adjustments (unaudited) RMB’000 RMB’000 4,922,418 (3,596,666) 1,325,752 37,918 6,655 (830,048) (147,625) (12,317) (123,811) 5,662 — 262,186 (262,535) (349) (18,035) 14,913 (3,471) 124,792 (125,141) (349) 121,670 (125,141) (3,471)	1 March Adjusted Financial Information under the Company’s policies (unaudited) RMB’000 4,922,418 (3,596,666)
											1,325,752 44,573 (830,048) (159,942) (118,149) —
											262,186 (262,535)
											(349)
											(18,035) 14,913
											(3,471)
											124,792 (125,141)
											(349)
											121,670 (125,141)
											(3,471)

— 478 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Unaudited Adjusted Consolidated Balance sheets under the Company’s Policies

					**As **	at 31 December					**As **	at 31 March
			2014			2015			2016			2017
				Adjusted			Adjusted			Adjusted			Adjusted
				Financial			Financial			Financial			Financial
		Unadjusted		Information	Unadjusted		Information	Unadjusted		Information	Unadjusted		Information
		Financial		under the	Financial		under the	Financial		under the	Financial		under the
		Information		Company’s	Information		Company’s	Information		Company’s	Information		Company’s
		under CAS	Adjustments	policies	under CAS	Adjustments	policies	under CAS	Adjustments	policies	under CAS	Adjustments	policies
		(audited)	(unaudited)	(unaudited)	(audited)	(unaudited)	(unaudited)	(audited)	(unaudited)	(unaudited)	(audited)	(unaudited)	(unaudited)
	Notes	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Non-current assets
Property, plant and equipment		344,946		344,946	630,430		630,430	1,141,862		1,141,862	1,179,647		1,179,647
Intangible assets	e	3,726,598	253,797	3,980,395	5,303,988	534,529	5,838,517	7,578,596	1,658,300	9,236,896	8,662,002	1,662,062	10,324,064
Investment in an associate		—		—	10,045		10,045	2,070,302		2,070,302	2,073,200		2,073,200
Goodwill		747,585		747,585	747,585		747,585	747,585		747,585	747,585		747,585
Available-for-sale financial
assets		20,000		20,000	159,530		159,530	1,690,529		1,690,529	1,692,632		1,692,632
Other investments		—		—	—		—	714,142		714,142	590,840		590,840
Deferred tax assets		196,219		196,219	507,251		507,251	763,343		763,343	838,853		838,853
Other non-current assets	e	230,797	(230,797)	—	511,529	(511,529)	—	1,658,300	(1,658,300)	—	1,662,062	(1,662,062)	—
		5,266,145		5,289,145	7,870,358		7,893,358	16,364,659		16,364,659	17,446,821		17,446,821
Current assets
Inventories		733,527		733,527	1,138,787		1,138,787	945,179		945,179	1,368,837		1,368,837
Trade and bills receivables		1,903,944		1,903,944	4,268,814		4,268,814	8,691,740		8,691,740	9,740,157		9,740,157
Prepayments and other
receivables		374,558		374,558	683,800	204,350	888,150	1,333,458	606,160	1,939,618	941,217		941,217
Financial assets at fair value
through profit or loss	d	—	50,000	50,000	—	63,266	63,266	—	623,483	623,483	—		—
Other current assets	d,e	73,000	(73,000)	—	290,616	(290,616)	—	1,229,643	(1,229,643)	—	428,238		428,238
Restricted bank balances	c	—		—	—		—	—	24,307	24,307	—	34,274	34,274
Pledged bank deposits	c		52,502	52,502	—	15,000	15,000	—	2,184,265	2,184,265	—
Cash and cash equivalents	c	499,850	(52,502)	447,348	2,729,778	(15,000)	2,714,778	3,669,146	(2,208,572)	1,460,574	3,657,616	(34,274)	3,623,342
		3,584,879		3,561,879	9,111,795		9,088,795	15,869,166		15,869,166	16,136,065		16,136,065
Current liabilities
Trade and bills payables		1,625,290		1,625,290	3,230,743		3,230,743	5,648,131		5,648,131	4,960,549		4,960,549
Accrual and other payables	f,g	380,073	380,868	760,941	1,810,250	501,930	2,312,180	405,036	1,030,693	1,435,729	1,303,963	508,338	1,812,301
Income tax payable	f	409,758	(281,420)	128,338	577,550	(402,954)	174,596	774,199	(601,955)	172,244	940,128	(451,010)	489,118
Bank borrowings	g	1,388,000	16,700	1,404,700	1,735,000		1,735,000	2,600,361	300,000	2,900,361	2,177,676		2,177,676
Bonds payable	g	—	484,607	484,607	—		—	—	1,917,664	1,917,664	—	1,922,194	1,922,194
Other financial liabilities		—		—	—		—	409,141	—	409,141	264,927	—	264,927
Other current liabilities	g	600,755	(600,755)	—	98,976	(98,976)	—	2,646,402	(2,646,402)	—	1,981,790	(1,979,522)	2,268
		4,403,876		4,403,876	7,452,519		7,452,519	12,483,270		12,483,270	11,629,033		11,629,033
Net current (liabilities) assets		(818,997)		(841,997)	1,659,276		1,636,276	3,385,896		3,385,896	4,507,032		4,507,032
Total assets less current
liabilities		4,447,148		4,447,148	9,529,634		9,529,634	19,750,555		19,750,555	21,953,853		21,953,853
Non-current liabilities
Deferred income		6,232		6,232	558		558	483,948		483,948	612,687		612,687
Long-term other payables		81,874		81,874	34,559		34,559	142,094		142,094	172,246		172,246
Bank borrowings		—		—	300,000		300,000	3,024,446		3,024,446	3,013,444		3,013,444
Bonds payable		—		—	1,900,558		1,900,558	—		—	—		—
Loan from a director	h	—		—	—	2,070,600	2,070,600	—	2,601	2,601	—	6,336	6,336
Loan from related parties	h	—	1,015,569	1,015,569	—	1,401,736	1,401,736	—	433,735	433,735	—		—
Deferred tax liabilities		—	—	—	6,490		6,490	3,038		3,038	3,038		3,038
Other non-current liabilities	h	1,015,569	(1,015,569)	—	3,472,336	(3,472,336)	—	5,615,277	(436,336)	5,178,941	3,355,277	(6,336)	3,348,941
		1,103,675		1,103,675	5,714,501		5,714,501	9,268,803		9,268,803	7,156,692		7,156,692
Net assets		3,343,473		3,343,473	3,815,133		3,815,133	10,481,752		10,481,752	14,797,161		14,797,161

— 479 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

					**As **	at 31 December					**As **	at 31 March
			2014			2015			2016			2017
				Adjusted			Adjusted			Adjusted			Adjusted
				Financial			Financial			Financial			Financial
		Unadjusted		Information	Unadjusted		Information	Unadjusted		Information	Unadjusted		Information
		Financial		under the	Financial		under the	Financial		under the	Financial		under the
		Information		Company’s	Information		Company’s	Information		Company’s	Information		Company’s
		under CAS	Adjustments	policies	under CAS	Adjustments	policies	under CAS	Adjustments	policies	under CAS	Adjustments	policies
		(audited)	(unaudited)	(unaudited)	(audited)	(unaudited)	(unaudited)	(audited)	(unaudited)	(unaudited)	(audited)	(unaudited)	(unaudited)
	Notes	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000
Equity
Share capital		841,190		841,190	1,856,015		1,856,015	1,981,680		1,981,680	1,994,720		1,994,720
Share premium		1,366,019		1,366,019	549,149		549,149	6,197,236		6,197,236	9,455,543		9,455,543
Statutory reserves		116,965		116,965	179,165		179,165	286,312		286,312	286,312		286,312
Other comprehensive income		(707)		(707)	27,837		27,837	54,771		54,771	51,649		51,649
Retained profits		843,360		843,360	1,315,492		1,315,492	1,705,569		1,705,569	1,830,361		1,830,361
		3,166,827		3,166,827	3,927,658		3,927,658	10,225,568		10,225,568	13,618,585		13,618,585
Non-controlling interests		176,646		176,646	(112,525)		(112,525)	256,184		256,184	1,178,576		1,178,576
Net equity		3,343,473		3,343,473	3,815,133		3,815,133	10,481,752		10,481,752	14,797,161		14,797,161

Note: Reclassification of accounts

Under Leshi Internet’s CAS accounting policies, Leshi Internet has presented several items which are different in regard to the presentation or classification under the Company’s HKFRS accounting policies. The details are as follows:

a) Share of result of an associate

Under Leshi Internet’s CAS accounting policies, Leshi Internet has presented the share of result of an associate in “Other income and gains”. According to HKFRS 1:82(c), the entity shall present the amount of share of result of an associate as a separate line item in the consolidated statement of profit or loss and other comprehensive income.

— 480 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

Had Leshi Internet adopted the Company’s accounting policy, the impact of the adjustments on profit or loss for the three years ended 31 December 2014, 2015 and 2016 and three months ended 31 March 2017 would have been as follows:

RMB’000

					For the three
					months ended
		**For the **	year ended 31 December		31 March
		2014	2015	2016	2017
		Unaudited	Unaudited	Unaudited	Unaudited
		Dr / (Cr)	Dr / (Cr)	Dr / (Cr)	Dr / (Cr)
Other	income and gain	(319)	45	35,829	—
Share	of (loss) profit of an associate	319	(45)	(35,829)	—

b) Finance costs and other finance charges

Under Leshi Internet’s CAS accounting policies, Leshi Internet has presented the bank charges and net exchange gain (loss) and bank interest income in “Finance costs”. According to HKAS 18:35(b)(iii), the entity shall present the amount of interest income from bank deposits in a significant category of revenue. According to HKFRS 7:20, bank charges and net exchange gain (loss) did not fall into the scope of the definition of finance costs, and shall be presented as an expenses other than “finance costs”.

Had Leshi Internet adopted the Company’s accounting policy, the impact of the adjustments on profit or loss for the three years ended 31 December 2014, 2015 and 2016 and three months ended 31 March 2017 would have been as follows:

RMB’000

				For the three
				months ended
	**For the **	year ended 31 December		31 March
	2014	2015	2016	2017
	Unaudited	Unaudited	Unaudited	Unaudited
	Dr / (Cr)	Dr / (Cr)	Dr / (Cr)	Dr / (Cr)
Other income and gain	(3,514)	(6,185)	(11,231)	(6,655)
Administrative expenses	23,768	70,843	109,120	12,317
Finance costs	(20,254)	(64,658)	(97,889)	(5,662)

— 481 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

c) Pledged bank deposits

Under Leshi Internet’s CAS accounting policies, Leshi Internet’s has presented the pledged bank deposits and restricted bank balances in “Cash and cash equivalent”. According to HKAS 1:55, the entity shall present an additional line items in the consolidated statement of financial position when such presentation is relevant to an understanding of the entity’s financial position. Since the pledged bank deposits and restricted bank balances did not fall in the scope of the definition of a item of cash and cash equivalent, the entity shall present the pledged bank deposits separately in the consolidated statement of financial position.

Had Leshi Internet adopted the Company’s accounting policy, the impact of the adjustments on the carrying amount of assets as at 31 December 2014, 2015 and 2016 and 31 March 2017 would have been as follows:

				RMB’000
				As at
		As at 31 December		31 March
	2014	2015	2016	2017
	Unaudited	Unaudited	Unaudited	Unaudited
	Dr / (Cr)	Dr / (Cr)	Dr / (Cr)	Dr / (Cr)
Restricted bank balances	—	—	24,307	34,274
Pledged bank deposits	52,502	15,000	2,184,265	—
Cash and cash equivalent	(52,502)	(15,000)	(2,208,572)	(34,274)

d) Financial assets at fair value through profit or loss

Under Leshi Internet’s CAS accounting policies, Leshi Internet has presented the financial assets at fair value through profit or loss in “Other current assets”. According to HKAS 1:54(d), the consolidated statement of financial position shall include a line item of financial assets.

Had Leshi Internet adopted the Company’s accounting policy, the impact of the adjustments on the carrying amount of assets as at 31 December 2014, 2015 and 2016 and 31 March 2017 would have been as follows:

				RMB’000
				As at
		As at 31 December		31 March
	2014	2015	2016	2017
	Unaudited	Unaudited	Unaudited	Unaudited
	Dr / (Cr)	Dr / (Cr)	Dr / (Cr)	Dr / (Cr)
Financial assets at fair value
through profit or loss	50,000	63,266	623,483	—
Other current assets	(50,000)	(63,266)	(623,483)	—

— 482 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

e) Film rights

Under Leshi Internet’s CAS accounting policies, Leshi Internet has presented the film rights in “Other current assets”. In the circumstances, the film rights are intangible assets which meet the definition in accordance with HKAS 38. According to HKAS 1:55, the entity shall present an additional line items in the consolidated statement of financial position when such presentation is relevant to an understanding of the entity’s financial position.

Had Leshi Internet adopted the Company’s accounting policy, the impact of the adjustments on the carrying amount of assets as at 31 December 2014, 2015 and 2016 and 31 March 2017 would have been as follows:

RMB’000

				As at
		As at 31 December		31 March
	2014	2015	2016	2017
	Unaudited	Unaudited	Unaudited	Unaudited
	Dr / (Cr)	Dr / (Cr)	Dr / (Cr)	Dr / (Cr)
Film rights	253,797	534,529	1,658,300	1,662,062
Other non-current assets	(230,797)	(511,529)	(1,658,300)	(1,662,062)
Other current assets	(23,000)	(23,000)	—	—

f) Income tax payables

Under Leshi Internet’s CAS accounting policies, Leshi Internet has presented the current tax payables and other domestic tax payables or levies in “Income tax payables”. According to HKAS 12:5, current tax is the amount of income tax payables in respect of the taxable profit for a period. According to HKAS 1:54(n), the entity shall present liabilities for current tax as defined in HKAS 12 Income tax in the consolidated statement of financial position. Since other domestic tax payables or levies are not arisen from the taxable profit, such liabilities shall not be presented in “Income tax payables”.

— 483 —

APPENDIX II

FINANCIAL INFORMATION OF LESHI INTERNET

Had Leshi Internet adopted the Company’s accounting policy, the impact of the adjustments on the carrying amount of assets as at 31 December 2014, 2015 and 2016 and 31 March 2017 would have been as follows:

					RMB’000
					As at
			As at 31 December		31 March
		2014	2015	2016	2017
		Unaudited	Unaudited	Unaudited	Unaudited
		Dr / (Cr)	Dr / (Cr)	Dr / (Cr)	Dr / (Cr)
Accrual	and other payables	(281,420)	(402,954)	(601,955)	(451,010)
Income	tax payables	281,420	402,954	601,955	451,010

g) Bank borrowings in current portion, short-term bonds payables, deferred income in current portion and other payables in current portion

Under Leshi Internet’s CAS accounting policies, Leshi Internet has presented the bank borrowings in current portion and short-term bonds payables in “Other current liabilities”. According to HKAS 1:54(m), the entity shall present the financial liabilities in the consolidated statement of financial position.

Under Leshi Internet’s CAS accounting policies, Leshi Internet has presented the deferred income in current portion and other payables in current portion in “Other current liabilities”. According to HKAS 1:29, the entity shall present separately each material class of similar items. Deferred income in current portion and other payables in current portion, to the extent that, is relating to the classification of other payables.

Had Leshi Internet adopted the Company’s accounting policy, the impact of the adjustments on the carrying amount of assets as at 31 December 2014, 2015 and 2016 and 31 March 2017 would have been as follows:

				RMB’000
				As at
		As at 31 December		31 March
	2014	2015	2016	2017
	Unaudited	Unaudited	Unaudited	Unaudited
	Dr / (Cr)	Dr / (Cr)	Dr / (Cr)	Dr / (Cr)
Accrual and other payables	(99,448)	(98,976)	(428,738)	(57,328)
Bank borrowings	(16,700)	—	(300,000)	—
Bonds payable	(484,607)	—	(1,917,664)	(1,922,194)
Other current liabilities	600,755	98,976	2,646,402	1,979,522

— 484 —

FINANCIAL INFORMATION OF LESHI INTERNET

APPENDIX II

h) Loan from related parties and a director

Under Leshi Internet’s CAS accounting policies, Leshi Internet has presented the loan advanced from related parties and a director in “Other non-current liabilities”. According to HKAS 24:18(b), the entity shall disclose the outstanding balance regarding to the related party transactions. According to HKAS 1:55, the entity shall present an additional line items in the consolidated statement of financial position when such presentation is relevant to an understanding of the entity’s financial position.

Had Leshi Internet adopted the Company’s accounting policy, the impact of the adjustments on the carrying amount of assets as at 31 December 2014, 2015 and 2016 and 31 March 2017 would have been as follows:

RMB’000

					As at
			As at 31 December		31 March
		2014	2015	2016	2017
		Unaudited	Unaudited	Unaudited	Unaudited
		Dr / (Cr)	Dr / (Cr)	Dr / (Cr)	Dr / (Cr)
Loan	from related parties	(1,015,569)	(1,401,736)	(433,735)	—
Loan	from a director	—	(2,070,600)	(2,601)	(6,336)
Other	non-current liabilities	1,015,569	3,472,336	436,336	6,336

— 485 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

The following management discussion and analysis of the results of Leshi Internet is extracted from the annual reports of Leshi Internet for the years ended 31 December 2014, 2015 and 2016 and the quarterly report of Leshi Internet for the first quarter ended 31 March 2017. These information are originally published in Chinese and the English translated version is provided for information purposes only. In case of discrepancies between the two versions, the Chinese version shall prevail.

The Directors wish to emphasize that the extracts reproduced below are not prepared for incorporation into this circular and the Group has not participated in their preparation. As such, the Directors do not express any view as to their truth, accuracy or completeness, and the Shareholders and investors should exercise caution and should not place undue reliance on such information.

A. MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF LESHI INTERNET FOR THE YEAR ENDED 31 DECEMBER 2014

Section IV Director’s Report

I. Management Discussion and Analysis

1. Review on major businesses within reporting period

In 2014, the internet industry achieved leap-forward development with products and services tending to be more intelligent and future-oriented. The industrial competition appears to be increasingly fierce. By centering on the annual business plan, the company keeps consolidating and perfecting the LETV ecology along with continuous expansion and innovation to further improve user experience and open more effective marketing patterns. With highlighted ecologic synergistic effect, the primary businesses of the company are growing steadily and rapidly.

Its website stream and population covered and other key indicators are ramping up substantially. As of December 31, 2014, the number of daily average uv (unique visitor) has reached 47 million with peak number of up to 70 million; the daily average pv has reached 240 million with peak number of 300 million; the vv daily average number has hit 260 million with peak number of 320 million. LeTV has over 400 cloud video opening platform CDN nodes distributed throughout the world with physical bandwidth total reserve of about 6T, having become the world’s largest opening video cloud computing platform.

The operation revenue earned within the report period reached RMB6.8189386 billion, increased by 188.79% year-on-year growth. The net profits for common stockholder subordinated to the listed company hit RMB 364.0295 million, increased by 42.75% year-on-year growth.

In 2014, the “LeTV-super TV” has completed the Max70, X60S, X50Air, S50Air, S40Air and S40AirL full-series product lines Through over a year of experience accumulation and persistent construction, the R&D, logistics and customer service of LeTV has been prone to perfect. Through in-depth internet marketing, brand value is being improved and the annual sales goal of 1.5 million sets of 2014 has been completed ahead of schedule.

Within the report period, the advertising service income has been substantially increased, with advertising revenue of RMB1.5720618 billion earned, increased by 87.38% year-on-year growth.

— 486 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Major products and services:

==> picture [433 x 250] intentionally omitted <==

(Homepage icon)

==> picture [433 x 250] intentionally omitted <==

(Homebrew Channel)

— 487 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

==> picture [433 x 208] intentionally omitted <==

(Sports Channel)

==> picture [433 x 245] intentionally omitted <==

(PC Client Products)

— 488 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

==> picture [433 x 338] intentionally omitted <==

(Mobile Client Products)

==> picture [211 x 140] intentionally omitted <==

==> picture [203 x 137] intentionally omitted <==

(Terminal Products)

— 489 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

==> picture [433 x 245] intentionally omitted <==

(LetvUI Page)

1. Main operating conditions in reporting period

2. (1) Main businesses analysis

3. 1) Overview

The Company is mainly engaged in advertising businesses, terminal businesses, member and distribution businesses and other businesses based on the whole network video industry. With the launch of smart terminal products, the Company has become the only network video services provider that realizes all-terminal coverage based on the one-cloud several-screen structure. Following the advanced development strategy, the Company continuously consolidates the whole industrial chain structure of Platform+Contents+Terminal+Application, enhances brand recognition, expands user scale and promotes the rapid development of main businesses.

Note: advertising business refers to the advertising business released on video platform; terminal business refers to the income from sales of terminal products of the Company, excluding paid service charges; other business refers to the businesses that bring less income at present before forming a scale, such as Cloud video platform business and technological development services.

— 490 —

APPENDIX III MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

• 2) Description on major changes of composition or sources of profits in reporting period

• Applicable � Not applicable

• 3) Revenue

				Year-on-year
				increase and
Items		2014	2013	decrease
Operating	revenues	6,818,938,622.38	2,361,244,730.86	188.79%

Factors driving the change of revenue

In the reporting period, the Company realized operating revenues of RMB 6.8189386 billion, up 188.79% year-on-year, which mainly benefited from the fast growth of advertising businesses and sales volume of smart terminal products. See Main Businesses Segment Report for details.

Whether the income of the Company from physical sales is higher than the labor income

□ Yes �No

Conditions of major in-hand orders of the Company

□ Applicable � Not applicable

Conditions of scattered orders

□ Applicable � Not applicable

Relevant conditions on major changes or adjustments of company products or services during the reporting period

□ Applicable � Not applicable

— 491 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

4) Cost

Unit: RMB

		2014		2013		Year-on-
		Proportion			Proportion	year
			in		in	increase
		operating			operating	and
Items		Amount	costs	Amount	costs	decrease
cdn and bandwidth charges		244,003,761.11	4.19%	160,842,943.03	9.64%	51.70%
Salary and welfare		143,931,965.80	2.47%	87,349,822.56	5.23%	64.78%
Transportation and communication	expenses	11,257,290.47	0.19%	7,037,396.53	0.42%	59.96%
Amortization cost	1,037,446,335.20		17.80%	619,249,009.45	37.11%	67.53%
Business entertainment		6,816,063.43	0.12%	4,387,116.20	0.26%	55.37%
Office allowance		8,874,352.73	0.15%	9,448,515.56	0.57%	-6.08%
Others		22,128,587.89	0.38%	6,595,142.20	0.40%	235.53%
Advertising costs		166,841,683.29	2.86%	85,517,119.03	5.12%	95.10%
Terminal cost	4,092,212,693.80		70.21%	688,256,942.91	41.25%	494.58%
TV play and derivatives		94,620,734.70	1.62%
Total	5,828,133,468.42		100.00%	1,668,684,007.47	100.00%	249.27%

5) Expenses

Unit: RMB

			Year-on-year
			increase and
	2014	2013	**decrease **	Descriptions on major changes
Selling expenses	489,035,465.49	194,520,082.60	151.41%	Caused by large growth of salary,
				promotion, logistics and after-sales
				expenses due to expansion of business
				scale.
Administration	175,454,652.60	89,988,324.29	94.97%	Caused by large growth of salary,
expenses				depreciation, amortization and equity
				incentive expenses due to expansion of
				business scale.
Financial expense	167,915,495.78	116,298,019.88	44.38%	Caused by growth of interest expenses
				of the Company.
Income Tax	-55,897,456.04	14,020,132.73	-498.69%	Caused by the deductible losses of
				confirmed deferred income tax assets
				of the subsidiary Leshi Zhixin.

— 492 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

• 6) R&D investment

• Applicable □ Not applicable

In the reporting period, to improve the core technological competitiveness of the Company and adapt to the fast development of internet market at present, the Company increased the investment to basic platform R&D, new products and technologies R&D and upgrading and rebuilding of current platform and put emphasis on the development of overseas market.

In the reporting period, the Company had R&D expenses of RMB 806 million, accounting for 11.81% of operating revenues at the same period.

In the reporting period, the Company updated and rebuilt current platorm, which greatly improved user experiences externally and improved operation efficiency internally. The R&D of new products has reached the phased objectives and the new products will be put to markets gradually to increase market share.

Proportion of R&D investment in operating income of the Company in recent three years

	2014	2013	2012
Amount of R&D investment (RMB)	805,571,804.76	373,971,798.29	237,607,802.89
Proportion of R&D investment in
operating income	11.81%	15.84%	20.36%
Capitalized amount of R&D
expenditure (RMB)	482,539,370.55	202,575,271.20	96,546,387.52
Proportion of capitalized amount of
R&D expenditure in R&D investment	59.90%	54.17%	40.63%
Proportion of capitalized amount of
R&D expenditure in net profits of
current period	374.65%	87.17%	50.82%

Reason for great change of capitalization rate of R&D investment and its reasonability description

• Applicable � Not applicable

— 493 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

7) Cash flow

			Unit: RMB
			Year-on-year
			increase and
Items	2014	2013	decrease
Subtotal for cash inflow generated from
operating activities	5,968,398,195.56	1,609,336,963.26	270.86%
Sub-total cash outflows from operating
activities	5,734,215,461.60	1,433,485,566.67	300.02%
Net cash flow generated from operating
activities	234,182,733.96	175,851,396.59	33.17%
Subtotal for cash inflow from
investment activities	76,906,966.88	10,017,500.00	667.73%
Sub-total cash outflows from
investment activities	1,602,584,606.41	907,684,536.13	76.56%
Net cash amount generated from
investment activities	-1,525,677,639.53	-897,667,036.13	-69.96%
Subtotal for cash inflow from financing
activities	3,080,997,521.88	2,101,478,022.94	46.61%
Subtotal for cash outflow from
financing activities	1,927,730,507.01	986,818,036.91	95.35%
Net cash flows from financing
activities operating activities	1,153,267,014.87	1,114,659,986.03	3.46%
Net increase in cash and cash
equivalents	-138,369,509.66	392,197,708.83	-135.28%

Description on causes for a year-on-year change of over 30% in relevant data

�Applicable □ Not applicable

• (1) In the reporting period, the cash inflow generated from the Company’s operating activities increased by 270.86% year-on-year and it was mainly caused by expansion of business scope and increase of returned money of the Company.

• (2) In the reporting period, the cash outflow generated from the Company’s operating activities increased by 300.02% year-on-year and it was mainly caused by expansion of business scope and increase of costs of the Company.

• (3) In the reporting period, the cash inflow generated from the Company’s investment activities increased by 667.73% year-on-year and it was mainly caused by the recouping of investment on financial products of subsidiary Flower Film & TV.

— 494 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

• (4) In the reporting period, the cash outflow generated from the Company’s investment activities increased by 76.56% year-on-year and it was mainly caused by the construction of long-term assets of the Company.

• (5) In the reporting period, the net cash flow generated from the Company’s investment activities decreased by 69.96% year-on-year and it was mainly caused by the construction of long-term assets at a large scale of the Company.

• (6) In the reporting period, the cash inflow generated from the Company’s financing activities increased by 46.61% year-on-year and it owed to the issuance of company bonds and strong financing capability of the Company.

• (7) In the reporting period, the cash outflow generated from the Company’s financing activities increased by 95.35% year-on-year and it was mainly caused by the repayment of loans, payment of interests and cash dividends.

• (8) In the reporting period, the net increase of the Company’s cash and cash equivalent decreased by 135.28% year-on-year and it was mainly caused by expansion of business scope and increase of business expenses of the Company.

Description on causes of major difference between cash flow of the Company business activities during the reporting period and annual net profit

□ Applicable � Not applicable

• 8) Conditions of major suppliers and customers of the Company

Conditions of major customers of the Company

Total sales amount of the five largest customers (RMB) 2,529,158,297.75 Proportion of total sales of the five largest customers in annual total sales 37.09%

Data of customers with proportion exceeding 30%

□ Applicable � Not applicable

Conditions of major suppliers of the Company

Total purchase amount of the five largest suppliers (RMB)	3,505,164,507.65
Proportion of total purchase amount of the five largest suppliers in
annual total purchase amount	45.39%

— 495 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

Data of suppliers with proportion exceeding 30%

□ Applicable

• Not applicable

• 9) Description on the Company’s future development and planning till the reporting period

Implementation of the Company’s future development and planning disclosed in the prospectus initially and publicly offered in the reporting period

□ Applicable � Not applicable

Progress of development strategy and business plan during the reporting period disclosed in the earlier stage

In the reporting period, centering on the annual development plan, the Company constantly enriched different products, strengthened and improved the LeTV ecology, improved brand recognition actively, strengthened brand influences, changed people’s Internet lifestyle, made efforts to create a high-quality life circle for LeTV lovers and accomplished the annual business plan 2014 and objectives of the Company. With further improvement of “platform+content+terminal+application” LeTV business ecosystem, the synergy among different businesses was continuously strengthened, brand value was continuously improved, user experiences and money realization capability of products were constantly improved, and operating indexes and main business of the Company also realized fast, steady and obvious growth.

1. Advantages in such aspects as traffic and user coverage have been further enhanced.

On the VideoMetrix TOP 10 List for monthly total view duration in December 2014 released on third party professional media monitoring platform comScore, LeTV ranked the top two in the industry. On monthly total uv list of video websites, it ranks the top three with monthly user coverage of 188 million.

— 496 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

==> picture [361 x 291] intentionally omitted <==

Fig. 1: TOP 10 List for Video Websites’ Monthly Total View Duration in December 2014

==> picture [361 x 291] intentionally omitted <==

Fig. 2: TOP 10 List for Video Websites’ Monthly Total UV in December 2014

— 497 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

1. Terminals have seen steady and rapid growth while ecology synergy strengthened.

In the reporting period, LeTV ● SuperTVs realized a hike in productivity of Max70, X60S, X50Air, S50Air, S40Air and S40AirL series products. With the improved product line and product features of double performances at half price, the proportion of sales of SuperTVs realized a fast and steady rise. Through over a year of experience accumulation and persistent construction, the R&D, logistics and customer service of LeTV has been prone to perfection and the brand value is being improved through in-depth internet marketing. CMM data showed that from January-October 2014, under the general condition of sales decline of Chinese most color TV brands, LeTV SuperTVs’s sales increased at a high speed and its sales share (online+offline) increased from 1.8% at the beginning of the year to 7.73% in October and its market share increased by over 4 times, still keeping ahead of many foreign brands such as Samsung, Sharp and Sony (3S). Besides, 40’’, 50’’, 60’’ and 70’’ TVs of LeTV made 41 monthly firsts in total sales online and offline, 50’’ and 60’’ TVs made monthly first in total sales for 10 consecutive months and 70’’ TV made 7 monthly firsts in total sales in the 8 months after listing.

1. The Company continued to enrich upstream contents to create a unique content matrix.

In the reporting period, the Company further stuck to the operational strategy of “Content matters” by means of “exclusive”+ “non-exclusive” plus powerful content and enhanced the copyright advantages by going all out in subdivisions featuring differentiation and the self-production field to provide more delicate content services for numerous users and our fans. In the first quarter of 2014, the exclusive second season of I Am a Singer of LeTV subverted the traditional operation ideas of video portals and realized user scale aggregation effects with the content layout cored with users. It hit 1.5 billion views on entire platform. Moreover, the Company obtained the network exclusive copyright of the second season of Chinese Idol of Dragon TV and star reality show Happy Sunday and the network copyright of Running Man of Chinese Edition of Zhejiang Satellite TV. By means of “exclusive”+ “non-exclusive” content matrix, it forged the strongest season of variety shows for numerous users and our fans.

With regard to self-production, LeTV still adhered to conducting content creation with the innovative cross-specialty internet products operation ideas by taking users as the core and big data analysis as the basis. At the end of 2014, LeTV promoted the concept of Self-produced New Year Season (New Year Package in Year of Goat) as the first company in the industry and sorted various delicate contents into a package and operate them for targeted user group. The mobile joke play Axian’s Life wrote, directed and played by the King of Variety Show Wu Zongxian, the women’s documentary Thank You, New York of commercial hot topic queen Tian Pujun, Super Teacher STB II , horror and suspense network play Channel No. 81 , comedy Diary of Monk Sha and the first children’s talk show Grade One’s Fable have been logged on or will be logged on LeTV gradually. They led and promoted the further development of self-production and brought good synergy and economic benefits to the Company.

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MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

LeTV Sports still maintained high-speed development. After getting the copyright of F1, FA Premier League, NBA and Chinese Super League, it got the copyright of Chinese Women’s Super League and Chinese Women’s Football Major League in future 5 sports competition seasons from 2015. The new media copyright advantage in sports contents of LeTV kept its leading position.

1. The synergy of vertical industry chain showed up and the Company gained new strength for its overseas development strategy.

In the reporting period, the “platform+content+terminal+application” ecology pattern was further improved and the ecological effect showed up at different levels of businesses. In order to seize the historic opportunity when Chinese Internet brands have become global and gained a leading edge, based on more than half year’s research and demonstration, the Company started to open up overseas businesses besides Chinese Mainland from July 2014 and established branch companies in Hong Kong in China, Los Angeles and the Silicon Valley in the US. On October 9th, 2014, SuperTVs entered Hong Kong officially and 1000 X50Air were all sold in only 9 minutes and 38 seconds, winning the first battle in overseas businesses and laying solid foundation for follow-up continuous expansion of overseas businesses.

Causes for the actual business performance of the Company over 20% lower or higher than the annual profit forecast disclosed

• Applicable � Not applicable

• (2) Main businesses segmenting report

• 1) Composition of income and profits from main businesses in reporting period

Unit: RMB

			Year-on-year
Items	2014	2013	increase
Income from advertising business	1,572,061,798.67	838,955,356.28	87.38%
Income from terminal business	2,740,047,010.46	504,176,701.05	443.47%
Income from membership and
distribution businesses	2,421,916,186.04	1,017,786,613.34	137.96%
Include: charging services	1,525,949,717.10	393,060,731.75	288.22%
Copying distribution business	704,591,996.39	624,725,881.59	12.78%
Movies and TV plays release
businesses	191,374,472.55
Other operating income	84,913,627.21	326,060.19	25942.32%
Total	6,818,938,622.38	2,361,244,730.86	188.79%

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APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Note: advertising business refers to the advertising business released on video platform; terminal business refers to the income from sales of terminal products of the Company, excluding paid service charges; other business refers to the businesses that bring less income at present before forming a scale, such as Cloud video platform business and technological development services.

• 2) Industries, products or regions with over 10% of operating income or operating profits of the Company

□ Applicable � Not applicable

• 3) Main business data of the Company adjusted in accordance with the statistical caliber of the reporting period in recent three years under the adjustment for statistical caliber of company main business data during the reporting period

□ Applicable � Not applicable

• (3) Analysis on assets and liabilities

• 1) Major changes in asset items

Unit: RMB

	End of 2014	End of 2014	End of 2013	End of 2013	Proportion
		Proportion		Proportion	increase	Descriptions
		in total		in total	and	on major
	Amount	assets	Amount	assets	decrease	changes
Monetary funds	499,850,156.29	5.65%	608,218,105.29	12.12%	-6.47%
Accounts	1,892,606,343.05	21.38%	950,248,021.06	18.93%	2.45%	Mainly caused
receivable						by the
						large-scale
						growth of
						main
						businesses of
						the Company
						such as
						advertising
						business and
						large customer
						sales business
						at terminals,
						and payment
						days.

— 500 —

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MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

	End of 2014	End of 2014	End of 2013	End of 2013	Proportion
		Proportion		Proportion	increase	Descriptions
		in total		in total	and	on major
	Amount	assets	Amount	assets	decrease	changes
Inventories	733,526,978.69	8.29%	146,626,151.46	2.92%	5.37%	Mainly caused
						by stock
						preparation
						based on
						prompt
						terminal
						products and
						stock after
						merger of
						Flower Film
						& TV Co.,
						Ltd.
Long-term equity			318,733.87	0.01%	-0.01%
investments
Fixed assets	343,015,085.10	3.88%	179,456,277.57	3.57%	0.31%	Mainly caused
						by expansion
						of the
						Company’s
						businesses and
						purchase
						growth of
						materials such
						as server.

2) Major changes in liability items

Unit: RMB

		2014		2013
			Proportion		Proportion	Proportion	Descriptions
			in total		in total	increase and	on major
		Amount	assets	Amount	assets	decrease	changes
Short-term	loans	1,388,000,000.00	15.68%	970,000,000.00	19.32%	-3.64%	Mainly caused
							by growth of
							the
							Company’s
							borrowings.
Long-term	loans			16,700,000.00	0.33%	-0.33%

— 501 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

• 3) Assets and liabilities measured by fair value

□ Applicable � Not applicable

(4) Analysis on major changes in the competitive capacity of the Company

□ Applicable � Not applicable

• (5) Analysis on investment condition

• 1) Conditions of foreign investment

□ Applicable � Not applicable

No foreign investment during the reporting period

• 2) Utilization condition of raised fund

� Applicable □ Not applicable

1. Utilization condition of raised fund

� Applicable □ Not applicable

Unit: RMB ten thousand

Total amount of raised fund	68,155.71
Total fund raised in reporting period	146.07
Accumulative total invested fund raised	68,669.83
Total fund raised for utilization alteration in the reporting period	0
Accumulative total fund raised for utilization alterations	0
Proportion of the total raised fund with utilization alterations	0.00%
General description on utilization condition of raised fund

In 2014, the utilization condition of the raised fund of the Company is as follows: (1) Before the fund above was fully raised, up to December 31st, 2014, the Company has accumulatively input RMB 60.1296 million to fund-raising projects with its self-raised fund. After the fund was fully raised, the Company displaced RMB 60.1296 million input in the fund-raising projects before with its raised fund. (2) Up to the end of 2014, the Company input RMB 626.5687 million to fund-raising projects directly. Up to December 31st, 2014, the raised fund in initial public offering was used up and the balance in special account for fund raising is RMB 0.

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APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Unit: RMB ten thousand		Benefit Significant	realized up changes in	to the end of Expected project	the reporting benefit feasibility or	period gained or not not			40,973.33 Yes No			5,262.82 Yes No		No	46,236.15 — —			4,411	932.33				510	2,299.85	1,181.34	— — —	— — —	9,334.52 — —	55,570.67 — —
			Benefit	realized in	the reporting	period			16,669.25			1,340.33			18,009.58			1,895.91	-583.85					-1,187	174.31	—	—	299.37	18,308.95
			Planned	availability	date of	project		Dec.31st,	2011		Dec.31st,	2011	Dec.31st,	2011	—											—	—	—	—
		Investment	progress by	the end of	period	(3)=(2)/(1)			100.74%			101.31%		100.94%	—													—	—
			Accumulated	investment	by the end of	period (2)			21,246.34			2,776.89		2,376.13	26,399.36			11,300.84	3,660	483.53		500	4,000	10,000	3,800.03	8,380	146.07	42,270.47	68,669.83
			Amount	invested in	the reporting	period			0			0		0	0			0	0	0		0	0	0	0	0	146.07	146.07	146.07
		Total	investment	after	adjustment	(1)			21,090			2,741		2,354	26,185			11,340	3,660	500		500	4,000	10,000	3,800	8,380	146.07	42,326.07	68,511.07
			Total	committed	investment of	raised fund			21,090			2,741		2,354	26,185			11,340	3,660	500		500	4,000	10,000	3,800	8,380	146.07	42,326.07	68,511.07
	Project	altered or	not	(including	partial	alteration)			No			No		No	—											—	—	—	—
				Committed investment project and	investment direction of excessive raised	fund	Committed investment project	Internet video basic and application platform	transformation and upgrading project	3g mobile phone, streaming media and TV	application platform transformation and	upgrading project		R&D center expansion project	Subtotal of committed investment project	Investment direction of excessive raised	fund	Copyright purchase	Copyright purchase of Tianjin subsidiary	Server trusteeship	Server storage device and load balancing	device	Joint investment and production	Investment of Tianjin subsidiary	Copyright purchase of Tianjin subsidiary	Repaid bank loan (if any)	Supplemented working fund (if any)	Subtotal of excessive raised fund	Total

— 503 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Project	altered or Total Investment Benefit Significant	not Total investment Amount Accumulated progress by Planned Benefit realized up changes in	(including committed after invested in investment the end of availability realized in to the end of Expected project	partial investment of adjustment the reporting by the end of period date of the reporting the reporting benefit feasibility or	alteration) raised fund (1) period period (2) (3)=(2)/(1) project period period gained or not not			N/A		N/A		Applicable	1. Repayment of bank loans. On September 20th, 2010, the Proposal of Repaying Part of Bank Loans with Other Working Capital Related to Main Businesses	passed on the 15th meeting of the first session of the board of directors agreed to use other working capital related to main businesses RMB 83.8 million to repay	part of bank loans. Up to December 31st, 2014, the fund above has been fully repaid. 2. Purchase of copyright of films and TV plays and servers. On December	27th, 2010, the Proposal of Using Super Raised Fund to Purchase Copyrights and Servers passed on the 19th meeting of the first session of the board of directors	of the Company agreed to use the super raised fund RMB 80 million to purchase the copyright of films and TV plays at a price of RMB 75 million and servers,	storage devices and load balancing devices at a price of RMB 5 million. On April 14th, 2011, the Proposal of Using Super Raised Fund to Purchase Copyrights and	Server Trusteeship Services passed on the 25th meeting of the first session of the board of directors agreed to use the super raised fund RMB 38.4 million to	purchase copyrights and use RMB 5 million to pay for the server trusteeship charges. Besides, the Tianjin subsidiary purchased copyrights with super raised fund	RMB36.6 million. Up to December 31st, 2014, the Company has paid RMB 113.0084 million for the copyrights of 50 films and TV plays such as The Legend of	Zhenhuan, The Great Time, Palace and If You Are the One and the Tianjin subsidiary has paid RMB 36.6 million for the copyrights of 18 films and TV plays such	as Abandoned, Fate Symphony and Fall in Love with Zha Meile. The expenses on copyrights totaled RMB 149.6084 million. Expenses on server trusteeship totaled	RMB 4.8353 million. Expenses on servers, storage devices and load balancing devices totaled RMB 5 million. 3. Joint investment to TV plays. On February 1st,	2011, the Proposal of Using Super Raised Fund for Joint Investment on TV Plays to Get Network Copyrights passed on the 21st meeting of the first session of the	board of directors agreed to use the super raised fund RMB 40 million of the company on joint investment on TV plays to get network copyrights. Up to December	31st, 2014, the fund has been fully used in the project. 4. Investment to Tianjin Subsidiary. On July 22nd, 2011, the Proposal of Using Super Raised Fund for	Capital Increase of Wholly-own Subsidiary LeTV Information Technology (Tianjin) Co., Ltd. passed on the 30th meeting of the first session of the board of	directors agreed to use the super raised fund RMB 50 million for capital increase of its wholly-owned subsidiary LeTV Information Technology (Tianjin) Co., Ltd.	(hereinafter referred to as Tianjin Company). On August 16th, 2011, the Proposal of Using Super Raised Fund for Capital Increase of Wholly-own Subsidiary LeTV	Information Technology (Tianjin) Co., Ltd. passed on the 34th meeting of the first session of the board of directors agreed to use super raised fund RMB 50	million of the Company for the capital increase of its wholly owned subsidiary Tianjin Company. Up to December 31st, 2014, all the fund above has been injected	to the subsidiary. On January 18th, 2012, the 42nd meeting of the first session of the board of directors passed that LeTV can use other working capital related to	main businesses RMB 38 million for the purchase of network copyrights of films and TV plays. Up to December 31st, 2014, the Company has paid RMB 38	million for the copyright of 23 films and TV plays such as The Empire of Tang Ladies, Story of A Just Man and Family Property.
			Committed investment project and	investment direction of excessive raised	fund	Condition and reason for failing to reach the	planned progress or predicated profit (by	specific project)	Description on significant changes in the	feasibility of the project	Amount, utilization and utilization progress	of excessive raised fund

— 504 —

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MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Project	altered or Total Investment Benefit Significant	not Total investment Amount Accumulated progress by Planned Benefit realized up changes in	(including committed after invested in investment the end of availability realized in to the end of Expected project	partial investment of adjustment the reporting by the end of period date of the reporting the reporting benefit feasibility or	alteration) raised fund (1) period period (2) (3)=(2)/(1) project period period gained or not not		N/A		N/A		Applicable	Up to August 31st, 2010, the Company has invested RMB 60.1296 million actually to fund-raising projects from its self-raised fund. Huapu Tianjian Certified	Public Accountants (Beijing) Co., Ltd. verified the condition and issued Verification Report on Leshi Internet Information & Technology Corp (Beijing)’s	Displacement of Its Investment in Fund-raising Project with its Self-raised Fund (KSZ [2010] No. 6171) on December 6th, 2010. On December 15th, 2010, the	Proposal of Displacing the Investment in Fund-raising Project with Self-raised Fund was passed on the 18th meeting of the first session of the board of directors.	On February 23rd, 2011, the Company paid RMB 7.377 million to displace balanced raised fund invested to project through the special account of raised fund. Up	to December 31st, 2014, the Company has displaced all fund pre-invested to the project.		Applicable	The 23rd meeting of the second session of the board of directors and 2013 annual general meeting of stockholders of the Company passed the Proposal of Using	Surplus Raised Fund and Interest Income for Permanent Supplement to Working Capital on December 31st, 2013 and April 15th, 2014 respectively. The Company	was agreed to put the surplus raised fund to projects and use the super raised fund and net interest income of the account of raised fund, totally RMB 1.4607	million, for the permanent supplement to working capital.		N/A
			Committed investment project and	investment direction of excessive raised	fund	Change on implementation place of the	invested project by raised fund	Adjustment on implementation mode of the	invested project by raised fund	Early investment and replacement of the	invested project by raised fund							Condition on using idle raised fund to	temporarily supplement working capital					Balance and reason of surplus raised fund	during project implementation

— 505 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

1. Change items for raised fund

□ Applicable � Not applicable

No changes of raised fund of the Company during reporting period.

• 3) Major projects invested with funds not raised

□ Applicable � Not applicable

No major projects invested with funds not raised of the Company during reporting period.

• 4) Stocks of other listed companies held

□ Applicable � Not applicable

• 5) Stocks of financial enterprises held

□ Applicable � Not applicable

No stock of financial enterprises held during reporting period of company.

• 6) Purchase or sale of stocks of other listed companies

• Applicable � Not applicable

• 7) Financial assets measured at fair value

□ Applicable � Not applicable

• (6) Analysis on main joint-stock companies

• �Applicable □ Not applicable

— 506 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Conditions of main subsidiaries and joint-stock companies

Unit: RMB

			Main Products	Registered
Company Name.	Company Type	Industry	or Services	Capital	Total Assets	Net Asset	**Operating Income **	Operating Profits	Net Profits
Beijing LeTV Streaming Media	Subsidiary	Culture media	Advertising	3,000,000	2,618,483.42	2,618,483.42	0.00	-5,004.54	-5,004.54
Advertising Co., Ltd.
LeTV Information Technology	Subsidiary	IT	IT	360,000,000	2,313,615,061.29	466,503,581.73	556,325,983.49	-2,540,253.75	-342,252.71
(Tianjin) Co., Ltd.
LeTV Information Technology	Subsidiary	IT	IT	500,000	494,727.49	494,727.49	0.00	-2,278.32	-2,278.32
(Shanghai) Co., Ltd.
LeTV Information Technology	Subsidiary	IT	IT	USD30 million	237,077,055.01	199,224,905.42	10,232,207.94	-18,886,600.97	-18,886,600.97
(Hong Kong) Co., Ltd.
Leshi Zhixin Electronic	Subsidiary	IT	Production and	265,040,001	1,831,416,262.31	513,128,538.53	4,107,196,586.15	-502,783,389.93	-386,338,211.59
Technology (Tianjin) Limited			sales of
			products
Production and sales of	Subsidiary	IT	IT	300,000,000	461,067,440.61	334,224,903.23	64,207,547.17	45,707,814.02	34,299,512.94
products
LeTV Cloud Computing Co.,	Subsidiary	IT	IT	50,000,000	191,207,295.52	-20,556,226.92	130,722,973.32	-43,510,721.23	-32,633,040.92
Ltd.
Dongyang Flower Film & TV	Subsidiary	Culture media	Films and TV	3,000,000	418,723,644.51	231,846,258.38	234,632,083.03	121,662,854.11	104,789,028.71
Co., Ltd.			plays
			production and
			distribution
LeTV Sports Culture	Subsidiary	Culture	Culture media	20,000,000	139,963,675.36	-75,195,664.62	107,638,790.74	-107,245,206.16	-80,433,904.62
Development (Beijing) Co.,			and information
Ltd.			technology

Descriptions on the conditions of main subsidiaries and joint-stock companies

In the reporting period, the holding subsidiary Leshi Zhixin of the Company had great losses and it was mainly caused by the massive growth of sales of LeTV SuperTVs in the reporting period. According to the overall operation strategy of the Company, the Company did not rely on the sales of smart terminal products to generate profits at present while paid more attention on expansion of user scale to occupy certain market share, so it may cause certain effects on current profits of the Company.

Conditions of subsidiaries acquired and disposed in the reporting period

• Applicable � Not applicable

(7) Special-purpose entities under the control of the Company

• Applicable � Not applicable

— 507 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

II. Outlook for the Company Future Development

• (I) Industry development trend

• The internet video industry is promising and policy factors are conducive to the industry development of the Company.

At present, the internet is penetrating into all industries and fields of the economic society of China. In economic field, the boundary between internet and traditional industry becomes not obvious gradually and new industrial state and new economic growth point come into being. Enterprises start to conduct production and operation activities through internet at different degree and it promoted the industrial transformation and upgrading. Many professional institutions such as China Academy of Information and Communications Technology (CAICT) pointed it out that the internet industry of China still grows at a high speed and it plays a key role in transforming the way of economy development, implementing the innovation-driven strategy and improving the overall labor productivity in different industries and fields. In the future, the sustainable and healthy development of internet enterprises will be greatly promoted by accelerating the construction of broadband network infrastructures, promoting business innovation and development, optimizing internet industry management and improving the ability for safeguarding network and information security. Meanwhile, China has designated the culture industry as a pillar industry, specified the direction and objectives of cultural system construction and put forward to implement culture export and the going-out project and perfect relevant policies and measures, all of which provided a good atmosphere for the development of cultural industry.

With the construction of network infrastructures and continuous optimization and upgrading of broadband network, the basic environment of network was quickly developed and it supports the fast development of internet video industry. The state’s strategic positioning of cultural industry and great support to cultural industry laid foundation for the development of industry enterprises at a deeper depth and for the development of other industries, as well as provided a broader market space for the development of internet industry.

1. The market scale and user scale grow at a high speed, the productization property of internet video industry is strengthened and there appears an opportunity of fast development.

With the expansion of user scale of internet, the mobile internet develops at a high speed. In recent years, 3G of China was further popularized and 4G was put in commercial business. Wireless network developed at a high speed, the price of smart phone kept falling and the mobile internet was popularized and applied at a high speed. According to the 35th internet survey of CNNIC, up to December 2014, the number of netizens using mobile phones in China has reached 557 million, increased by 56.72 million compared with that in 2013. While the proportion of netizens using mobile phone in total netizens increased to 85.8% from 81.0% in 2013. In 2014, the per capita weekly hours on the internet of Chinese netizens reached 26.1h, increased by 1.1h compared with that at the end of 2013. With deeper use of internet of netizens, the per capita weekly hours on the internet of Chinese netizens continues to keep increasing. According to iResearch Report, the market scale of Chinese online video was RMB 23.97 billion in 2014, with a year-on-year growth of 76.4%, higher than the 48.0% in 2013. In the coming years, it is predicted it will still maintain a fast growth and it will reach RMB 36.6 billion in 2017.

— 508 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

In recent years, with the integration of three networks driving the development of entire cultural media industry chain and the reform of terminals, users’ options on contents transmission media are enriched, from traditional single screen of TV to PC terminal, OTT STB terminal, smart TV terminal and multiple screens at mobile terminals. Internet video has gone into the life of people and become one of the main ways of them for entertainment. Due to its convenient and optionality, internet video not only provides more diversified and free options for users, but also provides a channel of precision marketing for advertisers, promoting the development of internet videos. With the increasingly growing permeability and viscosity of internet videos and the high value and guidance quality of existing users, the internet videos will quickly be permeated and expanded to other user groups. With scale operation and industrial upgrading, the internet video industry welcomes an opportunity of leap-forward development.

(II) Future development plan and development objectives of the Company

1. Overall strategic objectives of the Company in 2015

The internet video industry at present has high requirements on innovation and reform. The industry develops at a high speed with fierce competition. In recent years, the Company stuck to the “platform+content+terminal+application” LeTV business ecosystem. With the content as the basis, the Company strengthened the development and application of relevant value-added services and brought exquisite experiences to users through multiscreen terminals such as PC, Phone, Pad and TV under the overall layout of leading technological advantages of multiple screens and the vertical industry chain of LeTV ecology. The Company keeps expanding the upstream and downstream of industrial chain and related services, releasing and implementing different important strategies, enhancing and perfecting LeTV ecology, improving brand recognition and user scale and promoting the rapid development of main businesses. At present, the LeTV ecology of the Company has formed strong compatibility and expandability and a close operation mechanism between different ecological factors has been formed, so that it can bring efficiency higher than independent operation of single factor. In the future, the Company will conduct systematic development based on LeTV ecology and further improve the competitive advantages of LeTV ecology, strengthen the anti-risk capability of the Company and expand the room for growth of the Company with the method of Internal generation+external extension.

In 2015, through continuous improvement, the Company will realize ecological content, ecological platform, ecological terminal, ecological application, ecological organization and ecological marketing and reach synergy with the greatest scale and strength from the ecologicalization of chains to ecologicalization of nodes. Through ecological synergy, the Company wins and gets close to users to the largest extent and changes the internet lifestyle of people, tries to create a high-quality life circle of LeTV fans and promotes the fast growth of main businesses income. In 2015, the overall operating income of the Company is expected to break RMB 15 billion and the growth rate of main businesses is expected to reach 100%.

— 509 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Eco-map of LeTV Businesses

==> picture [361 x 361] intentionally omitted <==

1. Objectives of different businesses of the Company in 2015

2. (1) Platform

3. In 2015, the Company will still make efforts to main its first position in long videos.

In the aspect of Cloud video platform, the holding subsidiary LeTV Cloud Computing Co., Ltd. accumulated more than 2000 customers in the fields of broadcasting and TV, E-commerce, education, media, cartoon and smart home and had cooperation in various ways with HIKVISION, Microsoft, Changba, JD, Hujiang, UCloud, Centrin Data and CZTV in 2014. At present, the Company will further increase the investment to Cloud video business based on the Company’s advantages in existing Cloud video platform business. In 2015, LeTV Cloud will fully support 4K and H.265 and provide solutions including Cloud on demand, Cloud live, CDN, video marketing and advertising, trying to forge a leading Cloud computing service platform and maintaining its first position in industry.

— 510 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

In the aspect of e-commerce platform, the Company aims to reach the objective of becoming top five with respect to overall strength in the e-commerce industry and the first one among e-commerce enterprises in 2015. The Company will expand the coverage of its products based on LeTV ecology and demands of LeTV fans. Meanwhile, the Company will strengthen the construction of basic capability of e-commerce platform, continue to integrate the after-sales service resources of the highest quality in China, provide the most professional guidance and services to users through the professional training on LeTV ecology, realize full coverage in Chinese Mainland and explore overseas businesses gradually.

(2) Content

In 2014, LeTV gathered many hot resource in the aspects of copyright, self-production, sports, music and film, laying solid foundation for operation of ecological contents. Based on LeTV ecology, the life cycle of content was infinitely lengthened in various content forms, the base number of audiences increased gradually and fully manifested on the terminals of five screens. Its operation values were deeply developed and a large-scale chain commercial effect of Big production, big ecology and big effect was formed.

In 2015, LeTV will still make efforts to maintain its first position in the industry of domestically produced TV plays and try to cover 80% of plays on satellite television channels, such as Million Dollar Bride II, Loved in the Purple, Female Thief, My Amazing Bride, A Colorful Life and Daughter Back. The historical drama Legend of Miyue produced by the subsidiary Flow Film & TV, directed by Zheng Xiaohong and starred by Sun Li, the court play starred by Fan Bingbing The Empress of China and two legendary plays recomposed from the arts of the platinic writer of Qidian Night Stalker and Back to the Ming Dynasty are grand plays of LeTV in 2015. The Empress of China made a record in audience rating (breaking 200 million) on LeTV once it was premiered. LeTV maintained its first position in the industry for long term in terms of three core data, video play coverage, total effective play duration and total number of browsed pages.

(3) Smart terminal

In 2015, the Company will continue to expand smart terminal products through vertical integration and provide exquisite services to users. Specific measures include continuing to enrich and perfect the product line of SuperTVs, promote a new generation of smart television and popularize the real smart screen, creating LetvUI system crossing terminals and conducting continuous updating and iterative operation to maintain its leading position in the industry and make the ecological large screen system become the center of entertainment of households, promoting various kinds of accessories to support the exquisite experiences and demands of users based on the product line of SuperTVs, and finding an opportunity to launch a brand new smart product complying with the principle of Quality Life besides smart TVs. In 2015, the sales target of super TV will reach 3-4 million sets and the holding volume will achieve a breakthrough of 5 million sets.

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APPENDIX III

(4) Application

For application products at mobile terminal, the Company will continue to improve the mobile terminal flow, enrich and optimize the product matrix at the mobile terminal, unceasingly improve the user experience of products at mobile terminal and achieve quick rising of users and industry ranking to follow the user demand and the market trend and promote further improvement of LETV ecology.

In the application market, the Company will further enrich the application number, improve the user experience, support more developers for product development around the large-size screen, carry out commercial exploration of application market and continue to be number one in the industry. In addition, the Company shall carry out effective layout in many aspects such as application of new technologies to achieve the strategic location of core application area of large-size screen.

Section V Important Issues

V. Implementation and Influence of Equity Incentive Plan

• �Applicable □ Not applicable

1. The first equity incentive plan

On June 13th, 2013, on the 9th meeting of the Second Board of Director of the Company, Bill about Adjustment of the Company’s Awarded Stock Option Exercise Price and the Number of Stock Options and Cancellation of Some Incentive Objects’ Stock Options was passed. As 55 of Company’s incentive objects in the equity incentive plan left for personal reasons, such as Zhang Yuanyuan and Li Lulu, they had already not had the qualification of incentive object according to Stock Option Incentive Plan , so the Company’s Board of Directors decided to cancel these 55 people’s inventive object qualifications and write off the granted stock options, 2.10824 million pieces in total (after adjustment). Bill about Vesting in the First Exercise Schedule of the Company’s First Stock Option Incentive Plan was adopted through examination. According to the Company’s first Revised Draft of Stock Option Incentive Plan (Draft) and the evaluation result of the first Stock Option Incentive Plan Evaluation and Management Method , the Board of Directors of the Company thought that the vesting condition in the first exercise schedule of the first stock option incentive plan had been met and agreed to give a total of 4,266,298 (after adjustment) stock options of the vesting in the first exercise schedule for 191 incentive objects with the method of directional issuance of the Company’s stocks.

Applied by the Company’s Board of Directions, confirmed by Shenzhen Stock Exchange and examined and registered by CSDC Shenzhen Branch, the Company, with August 21st, 2013 as the registration date of vesting in the first exercise schedule of the first stock option incentive plan, gave vesting of 4.266298 million stock options for 191 inventive objects in the application.

The above-mentioned items have been declared on the GEM information disclosure website specified by China Securities Regulatory Commission.

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2. The second equity incentive plan

On February 25th, 2013, on the 1st meeting of the Company’s Second Board of Directors, The Second Stock Option Incentive Plan (Draft) of Leshi Internet Information & Technology Corp (Beijing) and the abstract were examined and approved, as well as Implementation and Evaluation Management Method of The Second Stock Option Incentive Plan and Bill about Submission to the Shareholders Meeting of Authorization to the Board of Directors for Handling Relevant Matters of Equity Incentive, and independent directors issued their independent opinions of agreement.

On August 2nd, 2013, on the 12th meeting of the Company’s Second Board of Directors, Bill about The Second Stock Option Incentive Plan (Revised Draft) of Leshi Internet Information & Technology Corp (Beijing) was examined and approved, and independent directors issued their independent opinions to the Company’s stock option inventive plan and agreed the plan. King & Wood Mallesons issued relevant legal opinions.

On August 20th, 2013, the Company held the third temporary general meeting in 2013 where The Second Stock Option Incentive Plan of Leshi Internet Information & Technology Corp (Beijing) (Revised Draft) , Bill about the Company’s Evaluation Management Approach of the Second Stock Option Incentive Plan and Bill about Submission to the Shareholders Meeting of Authorization to the Board of Directors for Handling Relevant Matters of the Second Stock Opinion Incentive Plan were passed.

On August 21st, 2013, the Company held the 14th meeting of the Second Board of Directors where Bill about the First Granting of Stock Option related to the Second Stock Option Incentive Plan was reviewed and adopted, and the Board of Directors agreed to grant 400 inventive objects 14.296 million stock options. The granting date of stock option was August 21st, 2013.

On June 24th, 2014, the Company held the 33rd meeting of the Second Board of Directors where Bill about Adjustment of Stock Option Exercise Price and the Number of Stock Options related to the Company’s Second Stock Option Incentive Plan was examined and approved and there were 346 incentive objects having been granted stock options for the first time and 12.9240 million stock options according to The Second Stock Option Incentive Plan. The exercise price of stock option granted for the first time after adjustment was RMB 12.239.

On July 25th, 2014, the Company held the 36th meeting of the Second Board of Directors where Bill about Relevant Matters of Reserved Option Granting of the Company’s Second Stock Option Incentive Plan was examined and approved and the Board of Directors agreed to grant 69 incentive objectives 1.588 million stock options. The reserved stock options were granted on July 25th, 2014, with the exercise price of RMB 42.26.

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APPENDIX III

VII. Directors, Supervisors, Senior Managers and Employees

III. Remuneration Condition of Directors, Supervisor and Senior Managers

Remuneration Determination Procedures of Directors, Supervisors and Senior Managers

The allowance of Company’s directors and supervisors is determined after evaluation organized by the Board of Directors and that of senior managers is determined by the Board of Directors; Directors, supervisors and senior serving in the Company shall be paid by the Company. The allowance of independent directors is on the basis of the resolution of the shareholders’ meeting.

• Remuneration Determination Basis of Directors, Supervisors and Senior Managers

The Company’s profitability, and work and performance of directors, supervisors and senior managers

• Actual payment of remuneration to directors, supervisors and senior executives

The salary of the Company’s directors, supervisors and senior managers compensation has been paid according to the annual salary plan and the Company actually paid RMB 9.1544 million in 2014.

Remuneration conditions of directors, supervisors and senior managers of the Company in reporting period

Unit: RMB ten thousand

						Total	Actual
					Total	remuneration	obtained
					remuneration	obtained from	remuneration
				Employment	obtained from	the firms of	in reporting
Name	Post	Sex	Age	Status	the Company	shareholders	period
Jia Yueting	Chairman and general	Male		On the post	60	0	60
	manager
Liu Hong	Deputy Chairman and	Male		On the post	60	0	60
	Deputy General Manager
Deng Wei	Member of Board	Male		On the post	57	0	57
Zhang Changsheng	Independent director	Male		On the post	13.12		13.12
Shen Yanfang	Independent director	Female		On the post	13.12		13.12
Wu Meng	Chairman of Board of	Male		On the post	17.4	0	17.4
	Supervisors
Ji Xiaoqing	Supervisor	Female		On the post
Li Xiuying	Supervisor	Female		On the post
Jia Yuemin	Deputy General Manager	Male		On the post	54	0	54
Gao Fei	Deputy General Manager	Male		On the post	73.5	0	73.5

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						Total	Actual
					Total	remuneration	obtained
					remuneration	obtained from	remuneration
				Employment	obtained from	the firms of	in reporting
Name	Post	Sex	Age	Status	the Company	shareholders	period
Lei Zhenjian	Deputy General	Male		On the post	67.5	0	67.5
	Manager
Liang Jun	Deputy General	Male		On the post	116.4	0	116.4
	Manager
Jin Jie	Deputy General	Male		On the post	51	0	51
	Manager
Yang	Deputy General	Male		On the post	48	0	48
Yongqiang	Manager
Wu Yazhou	Deputy General	Male		On the post	72	0	72
	Manager
Liu Gang	Deputy General	Male		On the post	48	0	48
	Manager
Tan Shu	Deputy General	Female		On the post	66	0	66
	Manager
Yang Lijie	Chief Financial	Female		On the post	54	0	54
	Officer
Zhang Te	Deputy General	Male		On the post	44.4	0	44.4
	Manager, Secretary
	of the Board
Total	—	—	—	—	915.44	0	915.44

Equity incentive conditions granted to the directors, supervisors and senior managers of the Company in reporting period

□ Applicable � Not applicable

VI. Employees Condition of the Company

(I) Specialty composition of employees

	Number of	Proportion of
Post category	personnel	total number
Operating staff	1263	36.08%
Technicians	1618	46.22%
Sales personnel	351	10.03%
Managers	269	7.68%
Total	3501	100.00%

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(II) Education distribution of employees

	Number of	Proportion of
Education	personnel	total number
Master and above	509	14.54%
Undergraduate	2270	64.84%
College	651	18.59%
Technical secondary school, high school and below	71	2.03%
Total	3501	100.00%

(III) Age distribution of employees

	Number of	Proportion of
Age	personnel	total number
Above 50	8	0.23%
40 - 49	119	3.40%
31 - 39	1193	34.08%
Under 30	2181	62.30%
Total	3501	100.00%

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APPENDIX III

B. MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF LESHI INTERNET FOR THE YEAR ENDED 31 DECEMBER 2015

Section IV Management Discussion and Analysis

I. Overview

(I) Overview of general development of the Company

The Internet industry has made astounding advances in 2015, showing a trend of becoming smarter and more future-oriented in products and services which resulted in increasingly fiercer competition. Centering on the annual business schedule, the Company constantly strengthened and improved the LeTV ecology, continued to expand and innovate, further enhanced user experience and explored more effective marketing patterns. As the “platform+content+terminal+application” LeTV business ecosystem further improved, the synergy among different businesses continued to gain momentum with brand value on the rise, better user experience of products and expanding capability to monetize, all adding up to the rapid and steady progress towards the Company’s operating targets and significant growth in the main business.

During the reporting period, the Company registered operating revenues of RMB13, 016,725,100, an increase of 90.89% year-on-year and posted a net profit of RMB573, 027,200 vested in the common stockholders of the listed company, up 54.41% year-on-year.

• (II) Review of the Company’s businesses during the reporting period

• Advantages in such aspects as traffic and user coverage have been further enhanced.

The Company’s video website traffic, visitors and other key indicators continued to rise drastically. In 2015, daily average UV of the Company’s website exceeded 76 million, reaching a peak of nearly 245 million while that in the fourth quarter of 2015 neared 130 million; daily average VV hit 300 million with a peak of 570 million.

As for the two key indicators: duration and user coverage, the Company’s video website www.le.com topped the 2015 VideoMetrix TOP 10 list for video websites’ daily average UV, monthly view and total duration in December 2015 released by the third-party professional media monitoring platform comScore thanks to hit shows including The Legend of Miyue 《羋月傳》( ) and Go Princess Go 《太子妃升職記》( ). (See “I. Main businesses in which the Company engaged during the reporting period” in “Summary of the Company’s businesses”.)

1. The rapid development of the platform effectively bolstered our businesses.

The cloud video platform aims to create and share a global cloud ecology that centers on life, commerce and the society, build a vertically integrated ecology, i.e., cloud service (EaaS，Eco-as-a-Service) model in order to re-construct industry chain value. The platform provides leading professional video cloud services (e.g. CDN, cloud VOD, cloud Live and Data+), industry cloud services (e.g. broadcasting and television, education and sports), sharing cloud services (e.g. content sharing and issuance, live business), VR cloud platform and self-reliant cloud platform

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worldwide. So far, the platform has owned 650 CDN nodes and 15Tbps bandwidth reserve all across the world with millions of cloud lives for the year, hundred millions of daily device access, millions of concurrent users every second and successfully provided services to more than 100,000 corporate clients around the world, covering several billions of users.

1. Terminals have seen steady and rapid growth while ecology synergy was strengthened.

LeshiTV ● SuperTVs realized a hike in productivity. The Company constantly endeavored to optimize each link of the supply chain and improve productivity to satisfy strong demands for purchase by the massive consumers and hence succeeded in hitting the goal of selling 3 million SuperTVs in 2015. SuperTV product lines including S40, S50, X55, X60, X65, MAX70 have been moving towards perfection day by day and the custom-made uMAX120 was newly introduced, marking full coverage in the mainstream, high-end and super high-end product market. In 2015, the Company consecutively launched two generations of products - Super 3 and 4, which by applying the innovative technology of home network interaction, enabled TVs to understand users through super remote controllers and intelligently complete missions and orders given. Motion control by fingers or arms can replace external devices for playing games or controlling TVs, bringing smarter experience to our consumers. Performance of the two generations of products improved greatly with ever-perfecting user experience. SuperTVs took Chinese users’ habits into full consideration and brought conveniences to users through technological innovation. In terms of price, unnecessary brand and channel premium was cut owing to self-owned brands and e-commerce which benefited the users. The Company will continue to re-define smart terminal products through vertical integration in order to provide ultimate user experience, introduce new products, set up an across-terminal LetvUI system and operate with constant iteration so as to hold onto the leading position in the industry and make the large-screened ecology system a home recreational center for users. In the meantime, the Company will release various types of accessories around the SuperTV product lines to support users’ demands for ultimate experience and introduce brand-new smart products in line with “quality life” apart from smart TVs when it is appropriate.

1. The Company continued to enrich upstream contents to create a unique content matrix.

During the reporting period, the Company further stuck to the operational strategy of “Content matters” by means of “exclusive” + “non-exclusive” plus powerful content and enhanced the copyright advantages by going all out in subdivisions featuring differentiation and the self-production field to provide more delicate content services for numerous users and our fans. The Company managed to consolidate its advantages in the content domain with all-round coverage of contents such as TV series, movies, variety shows, animations and music and by combining external purchase and internal self-production. During the reporting period, LeTV maintained its advantage of ranking first in the industry with regard to domestic teleplays coverage, among which, costume historical drama The Legend of Miyue 《羋月傳》( ) produced by the Company’s subsidiary Flower Film & TV, directed by Zheng Xiaolong, starring actors including Sun Li made significant aggregation effect since its broadcasting on www.le.com, whose LeTV all-terminal view hit 12.5 billion by the time when the annual report was disclosed. A unique set of programs, among other things, Tiny Times 4: the End of Soul 《小時代( 4-靈魂盡頭》), You Are My Sunshine 《何以笙簫默》( ), Chronicles of the Ghostly Tribe (《九層妖塔》) and live events with exclusive copyrights by LeTV sports contributed to high growth

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of daily average UV. Self-produced series Go Princess Go 《太子妃升職記》( ) attracted a large number of paid members, greatly monetizing the traffic. In addition, www.le.com pooled plentiful great series such as Nirvana in Fire 《琅琊榜》( ), The Disguiser 《偽裝者》( ), Hero Dog 《神犬小七》( ), The Second Time 《二胎時代》( ), Shining Days 《璀璨人生》( ), Daughter Back II 《千金歸來Ⅱ》( ) while self-produced series Bro Sleeping On the Upper Bunk 《睡在我上鋪的兄弟》( ), Su Ranran Chasing Husband 《蘇染染追夫計》( ), I Am Clever 《我叫郝聰明》( ) earned high ratings and self-produced variety shows including To Get Married in Ten Weeks 《十周嫁出去》( ), Let’s Fashion Together 《極( 品模王》) and Weekly Joking of Teleplays 《每週神侃電視劇》( ) gained great audience response. The combination of copyright and self-production made it possible to fully cover audience demands.

1. The synergy of vertical industry chain showed up and the Company started to adopt a globalization strategy.

During the reporting period, the “platform+content+terminal+application” ecology pattern further improved and the ecological effect showed up at different levels of businesses. In order to seize the historic opportunity when Chinese Internet brands have become global and gained a leading edge, based on more than half year’s research and demonstration, the Company gradually started the implementation of globalization strategy with businesses in Hong Kong, Los Angeles in the US, the Silicon Valley and other cities getting on track and LeTV malls were officially launched in the US. With remarkable sales in the US, LeTV ● SuperTVs were dubbed “TVs that understand Chinese best”.

(III) Miscellaneous

During the reporting period, the Company’s major affiliates and related parties entered into strategic cooperation agreements with the government of Chongqing municipality to carry out in-depth cooperation in various aspects including cloud computing and big data, contract manufacturing of big-screened smart terminals and finance, marking a new high in cooperation between LeTV and the local government. By virtue of Chongqing’s influence as a national key city and the financial center in the area of upper Yangtze River, LeTV would not only be able to increase market share in the southwest region, but also pave the way for the landing and layout of LeTV ecology in the southwest, allowing LeTV to take off again in platform, content, terminal and application.

As disclosed in the Report on Purchase of Material Assets (draft) during the reporting period, the Company would seek to become the second largest shareholder of TCL Multimedia by subscribing its new shares in cash. Tied by such equity, the Company signed a Strategic Cooperation Memorandum with TCL Group to secure a multi-dimensional and in-depth strategic cooperation in strategic resources and business models and lead the world into the era of living room economic ecology around smart TVs to gradually improve the Internet lifestyle for families across the world, upgrade the business model of the industry and thus make it possible for Chinese national brands to outperform traditional TV manufacturers in Japan and Korea in the global market.

In addition, the Company invested in Beijing Media and became its shareholder. In order to conform to demands for public health services and the development trend of health service industry, the Company established a long-term and all-round strategic partnership with Winning Software to proactively explore medical and health cloud services in various Internet+ modes by making best of the two parties’ advantages in their respective fields. The Company and LeTV Sports jointly invested

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in Beijing Edooon to promote deeper cooperation by utilizing their influences on and advantages in channels, the market, users, content and other aspects, which has been of great significance for LeTV in the social networking O2O and Sports & Health fields and given full support for LeTV’s ecology layout.

(IV) Corporate internal control

The Company has continued to optimize and improve internal management, establish and perfect internal governance and organization structure and form scientific decision-making, implementation and monitoring mechanisms to ensure the Company’s business management complies with the laws and regulations and business activities are operated in an orderly manner, to improve operating efficiency and effectiveness and to realize development strategies. The Company has created a sound internal control environment, filled the gaps in management and eliminated hidden dangers, prevented, spotted in time and rectified erroneous acts, irregularities and frauds in a bid to secure the safety and completeness of the Company’s assets.

The Company runs effectively with complete qualifications including the Internet Content Provider License of the PRC , the Value-added Telecom Business License, the Radio and Television Program Production License , the Certificate for the Use of Short Message Service Access , the License for Audio-Video Programs Transmitted via Information Network , the Business License for Internet Culture , the License for Publishing on the Internet , the Internet Drug Information Service Certificate. The Company has also further improved internal control systems in accordance with the regulatory authorities of listed companies and established effective and balanced decision-making, implementation and monitoring mechanisms to make sure that the implementation of the Company’s internal rules and regulations are in compliance with related national laws and regulations, departmental rules and normative documents.

II. Main businesses analysis

1. Overview

Refer to “I. Overview” in the “Management Discussion and Analysis”.

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1. Revenue and cost

2. (1) Composition of operating revenue

Unit: RMB

Operating revenue Revenue from advertising business Revenue from terminal business Revenue from membership and distribution businesses Revenue from charging services Income from copyright businesses Revenue from TV plays release businesses Revenue from technological services Other operating revenue Total	2015 Amount Proportion in operating revenue 2,633,677,836.17 20.23% 6,088,833,693.67 46.78% 3,782,359,728.95 29.06% 2,710,141,070.62 20.82% 776,088,695.58 5.96% 296,129,962.75 2.27% 151,172,563.14 1.16% 360,681,302.19 2.77% 13,016,725,124.12 100%	2014 Amount Proportion in operating revenue Year-on- year increase/ decrease 1,572,061,798.67 23.05% 67.53% 2,740,047,010.46 40.18% 122.22% 2,421,916,186.04 35.52% 56.17% 1,525,949,717.10 22.38% 77.60% 704,591,996.39 10.33% 10.15% 191,374,472.55 2.81% 54.74% — 0.00% — 84,913,627.21 1.25% 324.76% 6,818,938,622.38 100% 90.89%

Note: Revenue from technological services refers to the revenue from Cloud video technological services provided by LeCloud Computing Co., Ltd.; other operating revenue refers to the revenue from technological services available for external use as authorized by the Company.

• (2) Industries, products or regions contributing over 10% of operating revenue or operating profits of the Company

□ Applicable � Not applicable

• (3) Whether the revenue of the Company from physical sales is higher than the labor revenue

• Applicable � Not applicable

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• (4) Performance of major sales agreements signed by the Company as of the reporting period

• Applicable � Not applicable

• (5) Composition of operating cost

					Unit: RMB
	2015		2014
		Proportion		Proportion	Year-on-
		in		in	year
		operating		operating	increase/
Operating cost	Amount	cost	Amount	cost	decrease
cdn and bandwidth
charges	472,147,581.74	4.25%	244,003,761.11	4.19%	93.50%
Salary and welfare	235,954,819.36	2.12%	143,931,965.80	2.47%	63.93%
Transportation and
communication
expenses	12,660,115.02	0.11%	11,257,290.47	0.19%	12.46%
Amortization cost	1,543,817,811.48	13.89%	1,037,446,335.20	17.80%	48.81%
Business entertainment	8,337,588.79	0.08%	6,816,063.43	0.12%	22.32%
Office allowance	27,140,127.72	0.24%	8,874,352.73	0.15%	205.83%
Others	41,184,229.18	0.37%	22,128,587.89	0.38%	86.11%
Advertising cost	489,951,422.94	4.41%	166,841,683.29	2.86%	193.66%
Terminal cost	8,185,920,966.49	73.67%	4,092,212,693.80	70.21%	100.04%
TV play and derivatives	94,894,461.12	0.85%	94,620,734.70	1.62%	0.29%
Total	11,112,009,123.84	100.00%	5,828,133,468.42	100.00%	90.66%

• (6) Whether there is any change in the consolidation scope during the reporting period

• Yes □ No

• (7) Relevant conditions on major changes or adjustments of company businesses, products or services during the reporting period

• Applicable � Not applicable

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(8) Conditions of major customers and major suppliers

Conditions of major customers of the Company
Total sales amount of the five largest customers (RMB)	3,833,520,142.40
Proportion of total sales of the five largest customers in annual
total sales	29.45%
Conditions of major suppliers of the Company
Total purchase amount of the five largest suppliers (RMB)	6,886,752,861.02
Proportion of total purchase amount of the five largest suppliers in
annual total purchase amount	45.03%

3. Expenses

Unit: RMB

			Year-on-year
			increase/
	2015	2014	**decrease **	Descriptions on major changes
Sales expenses	1,040,736,778.35	489,035,465.49	112.81%	The Company’s business development
				and staff expansion pushed up the staff
				salaries and office and conference
				expenses, coupled with development of
				the smart terminal business
				development, resulting in increase in
				logistics and after-sales expenses
Administrative	309,492,095.22	175,454,652.60	76.39%	More top talents were introduced due
expenses				to the Company’s rapid development,
				so that the salary and welfare, office
				and conference expenses, and
				consulting fee increased accordingly
Financial expenses	348,979,599.08	167,915,495.78	107.83%	The financial expenses are mainly
				ascribable to the interest cost of
				RMB118,133,082.89 formed by the
				Company’s withdrawal of interest-free
				loans from substantial shareholders Jia
				Yueting and Jia Yuefang according to
				the Accounting Standards for Business
				Enterprises. Such interest cost will be
				subject to exemption according to the
				substantial shareholders’ commitment
				to providing interest-free loans and
				stated in capital reserve.

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4. R&D investment

� Applicable □ Not applicable

Expected impact on the Company’s future development

				Expected impact on the Company’s
**SN **	Items	Progress	Goals to be achieved	future development
1	Basic platform	Under continuous	Build Letv’s self-owned advertising	Further enhance liquidity of
	building	R&D	platform, cash out ecological	advertising revenue; strengthen
			placement resources; set up Letv’s	self-owned APP’s recommendation
			recommended system and provide	capability, improve user experience
			technological support for the	based on big data analysis, and
			Company’s products and services;	through the self-help Cloud video
			build Cloud video platform and help	platform, form basic customer bases
			customers solve technological barriers	for future content aggregation and
			in building video platform, and further	issue, and derivative services; reduce
			verify the reliability of cloud services	computing resources, storage resources
			from the perspective of application so	and broadband resources; significantly
			that the Cloud platform can support	cut broadband expense, and ensure
			Letv’s various business lines; unify	stable data transmission under various
			the Company’s transmission platform	network conditions to improve user
			and reduce repeated development of	experience.
			various terminals and modules.
2	Upgrading of	Under continuous	Relying on the Company’s strong	Seize market share and enhance user
	terminal products	R&D	operation strength, improve service	viscosity to make it a quality content
	and new product		performance, facilitate users’ search	operation platform; in line with the
	R&D		for content, improve content operation;	market development, replace old model
			develop and upgrade new products.	products to improve product
				competitiveness, and improve user
				experience.
3	CDN project	Under continuous	Develop new functions based on the	Improve the stability of network
		R&D	existing CDN; develop dispatching	operation and the utilization rate of
			system, improve server’s adaptation to	network resources and enhance data
			media format, enhance the efficiency	collection and analysis capacity. CDN
			and stability of logs reported in the	will be the foundation and guarantee
			CDN server, and develop CDN data	for the issue of the overall Letv’s
			analysis platform to satisfy the	ecological content to the whole world
			Company’s increasing needs and better	in future.
			serve applications on various service
			terminals.
4	Development of	Under continuous	Realize centralized management of	Reduce operation cost and error rate,
	other business-	R&D	members, commodities and orders, sell	improve revenue and renewal rate and
	related		commodities in any combination, and	unify the virtual commodity report
	systems		follow up orders; make expansion and	platform and user behavior trajectory,
			improvement in respect of cost	providing favourable support for the
			reduction, availability, accessibility,	Company’s decisions; improve user
			service guarantee, live streaming	experience to enhance user viscosity,
			delay, etc. to better serve business and	retain frequent users and develop new
			undertake external commercial	users, reduce operating cost and carry
			businesses.	out business operations externally.

— 524 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Amount of R&D investment and proportion thereof in operating revenue of the Company in recent three years

	2015	2014	2013
R&D staff size (person)	1,519	1,023	406
Proportion of R&D staff size	31.10%	29.20%	21.00%
Amount of R&D investment (RMB)	1,224,120,437.18	805,571,804.76	373,971,798.29
Proportion of R&D investment in
operating revenue	9.40%	11.81%	15.84%
Capitalized amount of R&D
expenditure (RMB)	731,874,814.33	482,539,370.55	202,575,271.20
Proportion of capitalized amount of
R&D expenditure in R&D investment	59.79%	59.90%	54.17%
Proportion of capitalized amount of
R&D expenditure in net profits of
current period	337.09%	374.65%	87.17%

Reason for significant change in proportion of total R&D investment in operating revenue as compared with preceding year

==> picture [192 x 10] intentionally omitted <==

Reason for great change in capitalization rate of R&D investment and its reasonability description

==> picture [192 x 11] intentionally omitted <==

Number of patents in the recent two years

==> picture [188 x 10] intentionally omitted <==

				Patents
				cumulatively
				obtained as of the
		Patents already	Patents already	end of the
		applied for	obtained	reporting period
Invention patent		1,473	22	34
Utility model		158	76	78
Appearance design		556	230	240
Change of core technology team or
key technicians this year	No	significant change
Whether it is a high-tech enterprise
recognized by the Ministry of
Science and Technology	Yes

— 525 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

5. Cash flow

Unit: RMB

			Year-on-year
Items	2015	2014	increase/decrease
Subtotal of cash inflows from
operating activities	10,159,157,157.75	5,968,398,195.56	70.22%
Subtotal of cash outflows from
operating activities	9,283,455,281.29	5,734,215,461.60	61.90%
Net cash flows from operating
activities	875,701,876.46	234,182,733.96	273.94%
Subtotal of cash inflows from investing
activities	56,560,871.79	76,906,966.88	-26.46%
Subtotal of cash outflows from
investing activities	3,041,311,028.39	1,602,584,606.41	89.78%
Net cash flows from investing activities	-2,984,750,156.60	-1,525,677,639.53	95.63%
Subtotal of cash inflows from financing
activities	11,390,678,614.77	3,080,997,521.88	269.71%
Subtotal of cash outflows from
financing activities	7,025,329,507.77	1,927,730,507.01	264.44%
Net cash flows from financing
activities	4,365,349,107.00	1,153,267,014.87	278.52%
Net increase in cash and cash
equivalents	2,267,429,519.51	-138,369,509.66	-1,738.68%

Description on major influential factors for year-on-year significant change of relevant data

□ Applicable � Not applicable

Causes for major difference between net cash flows from the Company’s operating activities during the reporting period and the net profit this year

□ Applicable � Not applicable

III. Non-main businesses

□ Applicable � Not applicable

— 526 —

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MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

IV. Assets and liabilities

1. Major changes in asset composition

Unit: RMB

	**End **	of 2015		End of 2014
	Proportion			Proportion	Proportion
		in total		in total	increase/
	Amount	assets	Amount	assets	decrease
Monetary funds	2,729,778,115.14	16.07%	499,850,156.29	5.65%	10.42%
Accounts receivable	3,359,683,070.34	19.78%	1,892,606,343.05	21.38%	-1.60%
Inventories	1,138,787,425.07	6.71%	733,526,978.69	8.29%	-1.58%
Investment real estate				0.00%	0.00%
Long-term equity investment	10,045,254.04	0.06%		0.00%	0.06%
Fixed assets	629,348,189.66	3.71%	343,015,085.10	3.88%	-0.17%
Construction in progress				0.00%	0.00%
Short-term loans	1,735,000,000.00	10.22%	1,388,000,000.00	15.68%	-5.46%
Long-term loans	300,000,000.00	1.77%		0.00%	1.77%

1. Assets and liabilities measured at fair value

2. Applicable □ Not applicable

Unit: RMB

Gain/loss

		Gain/loss
		from change	Cumulative	Impairment
		in fair value	change in	withdrawn	Purchase	Sales
		in the	fair value	in the	amount in	amount in
	Opening	current	stated as	current	the current	the current	Ending
Items	balance	period	equity	period	period	period	balance
Financial assets
Available-for-sale
financial assets	0.00	5,072,950.59	5,072,950.59	80,675,719.67		85,748,670.26
Total of the above
items	0.00	5,072,950.59	5,072,950.59	80,675,719.67		85,748,670.26

Whether there is significant change in measurement attributes of major assets of the Company during the reporting period

□ Yes

� No

— 527 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

V. Investment analysis

1. General condition

• Applicable □ Not applicable

Investment in the same

Investment in the reporting period of the preceding year period (RMB) (RMB) Change 3,041,311,028.39 1,602,584,606.41 89.78%

1. Major equity investments obtained during the reporting period

2. Applicable � Not applicable

3. On-going major non-equity investments during the reporting period

4. Applicable � Not applicable

5. Financial assets measured at fair value

6. �Applicable □ Not applicable

Unit: RMB

Gain/loss from change in Cumulative Purchase Sales fair value change in amount amount Initial in the fair value during the during the Cumulative investment current stated as reporting reporting investment Ending Capital Asset category cost period equity period period revenue balance source Stock 80,675,719.67 5,072,950.59 5,072,950.59 80,675,719.67 0.00 0.00 85,748,670.26 Equity funds Total 80,675,719.67 5,072,950.59 5,072,950.59 80,675,719.67 0.00 0.00 85,748,670.26 —

5. Utilization condition of raised funds

□ Applicable � Not applicable

No utilization of raised funds by the Company during the reporting period.

— 528 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

VI. Sales of material assets and equity

1. Sales of material assets

□ Applicable � Not applicable

No sales of material assets by the Company during the reporting period.

1. Sales of material equity

□ Applicable � Not applicable

VII. Analysis of main holding and shareholding companies

�Applicable □ Not applicable

Information about major subsidiaries and shareholding companies contributing more than 10% of the Company’s net profit

Unit: RMB

			Registered			Operating		Operating
**Company name **	Company type	Main business	capital	Total assets	Net assets	revenue		profit		Net profit
Leshi Zhixin	Subsidiary	Production and	265,040,001.00	4,817,986,497.91 - 202,466,565.32		8,692,826,932.77	-	974,103,684.05	-	730,518,771.38
Electronic		sales of products
Technology
(Tianjin)
Limited
LeCloud	Subsidiary	Data processing,	662,619,965.00	915,213,273.62	290,815,154.07	562,394,995.64	-133,709,880.17		-100,282,410.13
Computing		software
Co., Ltd.		development

Acquirement and disposal of subsidiaries during the reporting period

• �Applicable □ Not applicable

Way of acquiring and Impact on the overall disposing of subsidiaries in the production & operation and Company name reporting period operating results

Khorgos Lehai Culture Media New establishment by Long-term positive impact on Co., Ltd. investment the Company’s operation New establishment by Long-term positive impact on Lexiang Holdings Co., Ltd. investment the Company’s operation

— 529 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Information about main shareholding companies

1. If the operating results of a single subsidiary or shareholding company change significantly year on year and have a material impact on the consolidated operating results of the Company, the Company should give an explanation on the change of its operating results and relevant reason thereof;

2. If the operating results of the main subsidiaries or shareholding companies do not experience significant change, but the scale and composition of assets or other major financial indexes change significantly and may have an impact on the Company’s operating results in future, the Company should give an explanation on the change and reason thereof;

3. For the Company’s holding of any subsidiary less related to the Company’s main businesses, the Company should explain the purpose of holding the subsidiary and future operating plan;

4. For companies from which the investment revenue accounts for more than 50% of net profits during the reporting period, the Company should explain the basic information of the equity investments contributing more than 10% investment revenue;

5. Operations of main subsidiaries or shareholding companies should be disclosed with reference to requirements for management discussion and analysis of the listed companies.

There was no information about the main holding and shareholding companies which should be disclosed by the Company during the reporting period.

VIII.Structured entities controlled by the Company

• Applicable � Not applicable

IX. Outlook for the Company’s future development

(I) Future overall strategy

The internet video industry in which the Company operates develops rapidly amid fierce competition and therefore has high requirements for innovation and reform. In recent years, the Company has been committed to building the “platform+content+terminal+application” “LeTV business ecosystem”. With the content as the basis, the Company strengthened the development and application of relevant value-added services and brought exquisite experiences to users through multiscreen terminals such as television, PC, mobile and tablet under the integrated layout of leading technological advantages of multiple screens and the vertical industrial chain of LeTV’s ecology. The Company will keep expanding the upstream and downstream along the industrial chain and peripheral services, releasing and implementing different important strategies, enhancing and improving “LeTV’s ecology”, building up brand recognition and user scale, and promoting the rapid development of main businesses. At present, the LeTV’s ecology gradually built up by the Company has formed strong compatibility and expandability, and the operation mechanism of close collaboration among

— 530 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

various ecoelements is more effective than independent operation of single management elements. In the future, the Company will conduct systematic development centering on “LeTV’s ecology”, and further improve the competitive advantages of LeTV’s ecology, strengthen its risk resistance capability and expand its growth space through “endogenous and extensive development”.

In 2016, the Company will make further improvement to realize ecologicalization from chains to nodes, such as ecological content structure, ecological platform, ecological terminal, ecological application, ecological organization and ecological marketing to achieve sizeable and powerful synergy and usher in a globalization process thoroughly. Through ecological synergy, the Company makes effort to get users and meet their needs to the greatest extent and change people’s Internet lifestyle, so as to create a high-quality life circle for Letv fans and further promote the fast growth of revenue from main businesses.

(II) Operational objectives for business areas of the Company for the year 2016

(1) Platform

As for LeCloud platform, in the beginning of 2016, LeCloud had finished staged financing with “Chongqing Strategic Fund” as its strategic investor, which fully reflected the recognition of the leading and unique ecological model of LeCloud by Chongqing. The cooperation between LeCloud and Chongqing further embodies the deep-going cooperation between LeTV and local government. By virtue of Chongqing’s influence as a national central city and financial center in the upper reaches of the Yangtze River, not only can LeTV’s market share in the southwest region be boosted, but also LeTV ecology can gain a foothold and make a layout in the southwest region. Based on its open closed-loop ecology, in the upcoming year, LeCloud platform will go full blast in terms of Product R&D, service optimization, market exploration, global layout and etc., and by means of the aforesaid cooperation with the local government, propel LeCloud toward a future-oriented ecological economy mode, constructing a global cloud ecology.

(2) Content

In 2016, LeTV will work hard for holding its first ranking in the field of long videos. Le.com will increase input in resources like copyright, self-made content, music and movies, to lay a solid foundation for ecological content operation in 2016. In addition, on the strength of its ecology, LeTV will try to extend the life cycle of its content indefinitely through various content forms, making its audience base increase progressively, and present its content fully on multi-screen terminals, digging deeper into its operation value, to form a chain large-scale commercial effect of “grand production, macro ecology and great influence”.

(3) Smart terminals

In 2016, LeTV will continually develop smart terminal products through vertical integration to provide extreme customer service. The concrete details include enriching and improving the product line of Super TV and launching a new generation of smart TV, to further popularize the full-fledged smart big screen TVs; building a cross-end LeTV UI system as well as updating it continuously and operating it iteratively, to remain its leading position in this field and make big screen ecological system the family entertainment center of the users in real sense; meanwhile, introducing various

— 531 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

accessories centering on the product line of Super TV to satisfy consumers’ need for ultimate experience; bringing out brand new smart products conforming to the concept of “quality life” besides Super TV at the right time. In 2016, LeTV plans to sell 6 million Super TVs with its ownership over 10 million.

(4) Application

In respect of mobile terminal application products, LeTV will keep enhancing data flow of mobile terminals as well as enriching and optimizing the product matrix in mobile terminals, to provide a better user experience unceasingly, make user amount and its industry ranking advance rapidly, and as a result, keep in step with user requirements and market trend, and to perfect LeTV’s ecology further.

Regarding the market of applications, LeTV will make further improvement on the amount of applications, provide better experience for its customers, give strong backing to more developers of products related to big screen, open the way for the commercial exploration of the application market, in order to retain its top spot. In addition, LeTV will layout in respects effectively such as various new application technologies to achieve its strategic position in the domain of big screen core applications.

XIV. Implementation of the Company’s equity incentive plan, employee stock ownership plan or other employee incentive measures

� Applicable □ Not applicable

(I) The first equity incentive plan

On November 3rd, 2015, the 3rd meeting of the 3rd Board of Directors of the Company deliberated and approved the Proposal on the Adjustment of the Exercise Price and Number of Stock Options under the Company’s First Equity Incentive Plan and Cancellation of Some Incentive Targets’ Options . As the eight incentive targets under the Company’s first equity incentive plan, including Zhang Kun, Zhao Yue, Shi Jiajing, Tuo Shangbin, Li Qiang, Zhu Xianqing, Li Nan and Liu Wei, left the Company for personal reasons, according to the Company’s First Stock Option Incentive Plan and relevant provisions, the Board of Directors disqualified the eight persons as incentive targets and cancelled 238,260 stock options already granted to them. Upon adjustment, the number of incentive targets under the first equity incentive plan was 171. According to the Company’s First Stock Option Incentive Plan and the Memorandum No. 8 on Growth Enterprise Board Information Disclosure: Obtaining, Granting, Exercise and Adjustment of Equity Incentive (Stock Options) , the 238,260 stock options would be cancelled. Upon adjustment, the number of stock options subject to first grant was 19,883,880, and the number of remaining unexercised stock options was 11,930,328.

— 532 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

The Company’s general meeting 2014 deliberated and approved the annual profit distribution plan 2014 and the equity distribution was completed on May 13th, 2015. As authorized by the Company’s general meeting, the Board of Directors adjusted the exercise price and number of stock options subject to first grant. Upon adjustment, the exercise price of stock options subject to first grant was RMB3.615 and the number was 43,744,536, and the number of remaining unexercised stock options was 26,246,722.

On the same day, the 3rd meeting of the 3rd Board of Directors deliberated and approved the Proposal on Exercising Conditions of the Third Exercise Period of the Company’s First Equity Incentive Plan. According to the Company’s Revision of the First Stock Option Incentive Plan (Draft) and the evaluation results of the First Stock Option Incentive Plan Evaluation Management Measures , the Board of Directors of the Company thought that the exercising conditions of the third exercise period of stock options subject to first grant under the first equity incentive plan were met and agreed to grant a total of 13,123,361 stock options exercisable in the third exercise period to 171 incentive targets by issuing the Company’s stocks to particular investors.

Relevant announcement indexes relating to the first equity incentive plan during the reporting period are as follows:

			Announcement
**Published **	on		No.	Content	Published in
November	3rd,	2015	2015-112	Announcement on the	www.cninfo.com.cn
				resolution of the 3rd
				meeting of the 3rd Board
				of Directors
November	3rd,	2015	2015-113	Announcement on the	www.cninfo.com.cn
				resolution of the 3rd
				meeting of the 3rd Board
				of Supervisors
November	3rd,	2015	2015-114	Announcement on the	www.cninfo.com.cn
				adjustment of the exercise
				price and number of stock
				options under the
				Company’s first equity
				incentive plan and
				cancellation of some
				incentive targets’ options
November	3rd,	2015	2015-115	Announcement on the	www.cninfo.com.cn
				exercising conditions of
				the third exercise period
				of the Company’s first
				equity incentive plan

— 533 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

			Announcement
**Published **	on		No.	Content	Published in
November	10th,	2015	2015-119	Announcement on the	www.cninfo.com.cn
				completion of
				cancellation of some
				stock options under the
				first equity incentive plan

(II) Stock options subject to first grant under the second equity incentive plan

During the reporting period, the exercise price and number of stock options subject to first grant under the Company’s second equity incentive plan were adjusted and some incentive targets’ options were cancelled and the first exercise was commenced:

On May 15th, 2015, the 51st meeting of the 2nd Board of Directors of the Company deliberated and approved the Proposal on the Adjustment of the Exercise Price and Number of Stock Options Subject to First Grant under the Company’s Second Equity Incentive Plan and Cancellation of Some Incentive Targets’ Options . As the 27 incentive targets subject to first grant of stock options under the Company’s second equity incentive plan, including Xiang Yingying, Wang Zheng, Wang Shanshan, Yu Songya, Liu Liang, Wang Chaojun, Zhang Yadong, Wu Jianhui, Liu Naikun, Lin Yang, Wu Suhua, Liu Haiming, Li Yan, Hong Junbiao, Peng Dongni, Liu Mingyang, Dai Meng, Hou Naisen, Bai Dexin, Zhu Xiaochuan, Tian Liang, Yang Bo, Zhang Guanglu, Zhong Dan, Tuo Shangbin, Wang Lei and Zhang Peng, left the Company for personal reasons, according to the Company’s Second Stock Option Incentive Plan and relevant provisions, the Board of Directors disqualified the 27 persons as incentive targets and cancelled the 557,000 stock options already granted to them. Upon adjustment, the number of incentive targets subject to first grant of stock options under the second equity incentive plan was 319. According to the Company’s Second Stock Option Incentive Plan and the Memorandum No. 8 on Growth Enterprise Board Information Disclosure: Obtaining, Granting, Exercise and Adjustment of Equity Incentive (Stock Options) , the 557,000 stock options would be cancelled. Upon adjustment, the number of stock options subject to first grant was 12,367,000.

The Company’s general meeting 2014 deliberated and approved the annual profit distribution plan 2014 and the equity distribution was completed on May 13th, 2014. As authorized by the Company’s general meeting, the Board of Directors adjusted the exercise price and number of stock options subject to first grant. Upon adjustment, the exercise price of stock options subject to first grant was RMB5.542, and the number was 27,207,400.

Meanwhile, the 51st meeting of the 2nd Board of Directors deliberated and approved the Proposal on Exercising Conditions of the First Exercise Period of Stock Options Subject to First Grant under the Company’s Second Equity Incentive Plan .

— 534 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

According to the Company’s Revision of the Second Stock Option Incentive Plan (Draft) and the evaluation results of the Second Stock Option Incentive Plan Evaluation Management Measures , the Board of Directors of the Company thought that the exercising conditions of the first exercise period of stock options subject to first grant under the second equity incentive plan were met and agreed to grant a total of 5,441,480 stock options exercisable in the first exercise period to 319 incentive targets by issuing the Company’s stocks to particular investors.

As at December 31st, 2015, 5,397,019 stock options subject to first grant under the second equity incentive plan was exercised, and the Company’s share capital increased 5,397,019 shares, which had no material impact on the Company’s financial condition.

Relevant announcement indexes relating to the second equity incentive plan during the reporting period are as follows:

	Announcement
Published on	No.	Content	Published in
May 15th, 2015	2015-036	Announcement on the	www.cninfo.com.cn
		resolution of the 51st
		meeting of the 2nd Board
		of Directors
May 15th, 2015	2015-037	Announcement on the	www.cninfo.com.cn
		resolution of the 29th
		meeting of the 2nd Board
		of Supervisors
May 15th, 2015	2015-038	Announcement on the	www.cninfo.com.cn
		adjustment of the exercise
		price and number of stock
		options subject to first
		grant under the
		Company’s second equity
		incentive plan and
		cancellation of some
		incentive targets’ options
May 15th, 2015	2015-039	Announcement on the	www.cninfo.com.cn
		exercising conditions of
		stock options subject to
		first grant under the
		second equity incentive
		plan

— 535 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

(III) Reserved stock options under the second equity incentive plan

On July 22nd, 2015, the 50th meeting of the 2nd Board of Directors of the Company deliberated and approved the Proposal on the Adjustment of the Exercise Price and Number of Reserved Stock Options under the Company’s Second Equity Incentive Plan and Cancellation of Some Incentive Targets’ Options , as the nine incentive targets relating to reserved stock options under the Company’s second equity incentive plan, including Chen Weiguo, Guo Dagang, Ji Jiang, Liu Jianlong, Liu Wang, Wang Yang, Wang Jingwen, Ying Jun, Yu Lizhu, left the Company for personal reasons, according to the Company’s Second Stock Option Incentive Plan and relevant provisions, the Board of Directors disqualified the nine persons as incentive targets and cancelled the 350,000 stock options already granted to them. Upon adjustment, the number of incentive targets relating to reserved stock options under the second equity incentive plan was 60. According to the Company’s Second Stock Option Incentive Plan and the Memorandum No. 8 on Growth Enterprise Board Information Disclosure: Obtaining, Granting, Exercise and Adjustment of Equity Incentive (Stock Options) , the 350,000 stock options would be cancelled. Upon adjustment, the number of reserved stock options was 1,238,000.

The Company’s general meeting 2014 deliberated and approved the annual profit distribution plan 2014 and the equity distribution was completed on May 13th, 2015. As authorized by the Company’s general meeting, the Board of Directors adjusted the exercise price and number of reserved stock options under the second equity incentive plan. Upon adjustment, the exercise price of reserved stock options was RMB19.1882, and the number was 2,723,600.

On November 5th, 2015, the 4th meeting of the 3rd Board of Directors of the Company deliberated and approved the Proposal on the Exercising Conditions of the First Exercise Period of the Reserved Stock Options under Company’s Second Equity Incentive Plan . According to the Company’s Second Stock Option Incentive Plan (Draft Revision) and the evaluation result of the Second Stock Option Incentive Plan Evaluation Management Measures, the Board of Directors of the Company thought that the exercising conditions of the first exercise period of the reserved stock options under the second equity incentive plan were met and agreed to grant a total of 817,080 stock options exercisable in the first exercise period to 60 incentive targets by issuing the Company’s stocks to particular investors.

Relevant announcement indexes relating to the reserved stock options under the second equity incentive plan during the reporting period are as follows:

	Announcement
Published on	No.	Content	Published in
July 22nd, 2015	2015-078	Announcement on the	www.cninfo.com.cn
		resolution of the 59th
		meeting of the 2nd Board
		of Directors
July 22nd, 2015	2015-079	Announcement on the	www.cninfo.com.cn
		resolution of the 34th
		meeting of the 2nd Board
		of Supervisors

— 536 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

	Announcement
Published on	No.	Content	Published in
July 22nd, 2015	2015-080	Announcement on the	www.cninfo.com.cn
		adjustment of the exercise
		price and number of
		reserved stock options
		under the Company’s
		second equity incentive
		plan and cancellation of
		some incentive targets’
		options
November 5th, 2015	2015-116	Announcement on the	www.cninfo.com.cn
		resolution of the 4th
		meeting of the 3rd Board
		of Directors
November 5th, 2015	2015-117	Announcement on the	www.cninfo.com.cn
		resolution of the 4th
		meeting of the 3rd Board
		of Supervisors
November 5th, 2015	2015-118	Announcement on the	www.cninfo.com.cn
		exercising conditions of
		the first exercise period
		of the reserved stock
		options under the
		Company’s second equity
		incentive plan

(IV) The third equity incentive plan

On September 23rd, 2015, the Company launched the third equity incentive plan, and the 64th meeting of the 2nd Board of Directors deliberated and approved the Proposal on and Summary Thereof , the Proposal of the Company on Moreover, on October 14th, 2015, the Company’s second extraordinary general meeting 2015 deliberated and approved the aforesaid two proposals and the Proposal on the General Meeting Authorizing the Board of Directors to Handle Relevant Matters of the Company’s Third Stock Option Incentive Plan .

— 537 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

On November 16th , 2015, the 5th meeting of the 3rd Board of Directors of the Company deliberated and approved the Proposal on the Company’s Third Stock Option Incentive Plan . According to the authorization of the Company’s second extraordinary general meeting 2015, the Board of Directors thought that the authorization conditions under the Stock Option Incentive Plan were satisfied, and as entrusted by the Company’s general meeting, the Board of Directors determined November 13th, 2015 as the grant date of the Company’s equity incentive plan on which 18,560,000 stock options would be granted to 360 incentive targets.

Relevant announcement indexes relating to the third equity incentive plan during the reporting period are as follows:

	Announcement
Published on	No.	Content	Published in
September 23rd, 2015	2015-096	Announcement on the	www.cninfo.com.cn
		resolution of the 64th
		meeting of the 2nd Board
		of Directors
September 23rd, 2015	2015-097	Announcement on the	www.cninfo.com.cn
		resolution of the 38th
		meeting of the 2nd Board
		of Supervisors
September 23rd, 2015		The third stock option	www.cninfo.com.cn
		incentive plan (draft) of
		Letv Information
		Technology (Beijing) Co.,
		Ltd.
September 23rd, 2015		Summary of the third	www.cninfo.com.cn
		stock option incentive
		plan (draft) of Leshi
		Internet Information &
		Technology Corp
		(Beijing)
September 23rd, 2015		Implementation of	www.cninfo.com.cn
		evaluation management of
		the third stock option
		incentive plan
October 14th, 2015	2015-103	Announcement on the	www.cninfo.com.cn
		resolution of the second
		extraordinary general
		meeting 2015

— 538 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

			Announcement
**Published **	on		No.	Content	Published in
November	16th,	2015	2015-122	Announcement on the	www.cninfo.com.cn
				resolution of the 5th
				meeting of the 3rd Board
				of Directors
November	16th,	2015	2015-123	Announcement on the	www.cninfo.com.cn
				resolution of the 5th
				meeting of the 3rd Board
				of Supervisors
November	16th,	2015	2015-124	Announcement on the	www.cninfo.com.cn
				granting of the
				Company’s third equity
				incentive plan

IV. Remuneration of directors, supervisors and senior executives

Procedure for making decisions on, basis for determining and actual payment of remuneration of directors, supervisors and senior executives

Procedure for making The allowances for Company’s directors and supervisors are decisions on determined upon evaluation organized by the Board of remunerations of Directors and the remuneration of senior executives is directors, supervisors and determined by the Board of Directors; the remuneration of senior executives directors, supervisors and senior executives serving in the Company should be paid by the Company. The allowance for independent directors is resolved on at the general meeting. Basis for determining The remuneration is determined according to the Company’s remuneration of directors, profitability, division of work and performance of directors, supervisors and senior supervisors and senior executives executives

• Actual payment of The salary of the Company’s directors, supervisors and senior remuneration of directors, executives has been paid according to the annual salary plan, supervisors and senior and the Company actually paid RMB10.32 million in 2015 executives

Statistics of remuneration of the Company’s directors, supervisors and senior executives during the reporting period is made according to their respective terms of office.

— 539 —

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MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Remuneration of directors, supervisors and senior executives of the Company during the reporting period

Unit: RMB’0,000

						Unit: RMB’0,000
						Whether the
						director/supervisor
						/senior executive
						obtains
					Total pre-tax	remuneration
					remuneration	from the
				Incumbent	obtained from the	Company’s
Name	Post	Sex	Age	or not	Company	connected party
Jia Yueting	Chairman and general	Male	43	Incumbent	60	Yes
	manager
Han Fangming	Vice chairman	Male	50	Incumbent	32	No
Liu Hong	Director and deputy	Male	43	Incumbent	60	No
	general manager
Deng Wei	Director	Male	39	Resigned	50	No
Zhang Changsheng	Independent director	Male	67	Resigned	11	No
Shen Yanfang	Independent director	Female	43	Resigned	11	No
Zhu Ning	Independent director	Male	43	Incumbent	3	No
Cao Bin	Independent director	Male	45	Incumbent	3	Yes
Wu Meng	Chairman of the Board of	Male	41	Incumbent	26	No
	Supervisors
Ji Xiaoqing	Supervisor	Female	36	Incumbent	0	Yes
Li Xiuying	Supervisor	Female	56	Resigned	0	Yes
Tian Bingxin	Supervisor	Male	60	Incumbent	0	No
Jia Yuemin	Deputy general manager	Male	46	Resigned	48	No
Gao Fei	Deputy general manager	Male	40	Incumbent	77	No
Lei Zhenjian	Deputy general manager	Male	35	Resigned	66	No
Liang Jun	Deputy general manager	Male	46	Incumbent	169	No
Jin Jie	Deputy general manager	Male	44	Incumbent	58	No
Yang Yongqiang	Deputy general manager	Male	41	Incumbent	48	No
Wu Yazhou	Deputy general manager	Male	40	Incumbent	79	No
Liu Gang	Deputy general manager	Male	47	Resigned	6	No
Tan Shu	Deputy general manager	Female	41	Incumbent	71	No
Yang Lijie	Chief financial officer	Female	41	Incumbent	54	No
Zhang Te	Deputy general manager,	Male	36	Resigned	37	No
	Board secretary
Yuan Bin	Deputy general manager	Male	40	Incumbent	24	No
Zhang Minhui	Deputy general manager	Male	38	Incumbent	18	No
Jiang Xiaolin	Deputy general manager	Female	41	Incumbent	15	No
Zhao Kai	Board secretary	Male	30	Incumbent	6	No
Total	—	—	—	—	1032	—

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MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

Equity incentive conferred to the directors, supervisors and senior executives of the Company during the reporting period

• Applicable □ Not applicable

During the reporting period, the Company released the third equity incentive plan, and the Company’s vice chairman Fan Fangming was granted 500,000 stock options, deputy general manager Jiang Xiaolin was granted 100,000 stock options, and the Board secretary Zhao Kai was granted 80,000 stock options. The exercise price of the stock options granted during the aforesaid reporting period was RMB38.84/share.

V. Employees of the Company

(I) Professional composition of employees

Post category	Number	Proportion
Managerial personnel	424	8.7%
Technical personnel	2517	51.5%
Sales personnel	646	13.2%
Operational personnel	1298	26.6%
Total	4885	100.0%

(II) Education level of employees

		Proportion
		of the total
Education level	Number	number
Master’s degree and above	806	16.5%
Bachelor’s degree	3288	67.3%
Junior college education	731	15.0%
Technical secondary school education, high school education
and below	60	1.2%
Total	4885	100.0%

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MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

(III) Age distribution of employees

		Proportion
		of the total
Age range	Number	number
50 and above	9	0.2%
40 — 49	197	4.0%
31 — 39	1970	40.33%
30 and below	2709	55.46%
Total	4885	100.0%
The Company’s compensation cost
	Current period
Total number of employees receiving remuneration in the current
period (person)		6,945
Total remuneration incurred in the current period (RMB’0,000)		107,488.04
Proportion of total remuneration in operating revenue of the current
period		8.26%
Average remuneration of senior executives (RMB’0,000/person)		38.22
Average remuneration of all employees (RMB’0,000/person)		15.48

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MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

• C. MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF LESHI INTERNET FOR THE YEAR ENDED 31 DECEMBER 2016

Section IV Operation Discussion and Analysis

I. Overview

(I) Overview of general development of the Company

The Internet industry has made astounding advances in 2016, showing a trend of becoming smarter and more future-oriented in products and services which resulted in increasingly fiercer competition in the industry. Centering on the annual business schedule, the Company constantly strengthened and improved the Letv ecology, continued to expand and innovate, further enhanced user experience and explored more effective marketing patterns. As the “platform+content+hardware+software+application” Letv business ecosystem further improved, the synergy among different businesses continued to gain momentum with brand value on the rise, better user experience of products and expanding capability to monetize, all adding up to the rapid and steady progress towards the Company’s operating targets and stable growth in the main business.

In 2016, the Company registered a total operating revenue of RMB21,986,878,500, an increase of 68.91% year-on-year and posted a net profit of RMB554,759,200 vested in the common stockholders of the listed company, down 3.19% year-on-year. Changes in the Company’s performance are as follows:

First, as compared with the same period of last year, sales of the Company’s smart terminal products gained momentum, as evidenced by robust sales of SuperTVs, which helped the Company maintain its leadership in the smart TV sector and significantly pushed up the Company’s operating revenue.

Second, under a wider business range, new businesses were still growing, resulting in decrease of total profits. Meanwhile, SuperTV’s rapid acquisition of users through high configuration, high performance, ultimate experience and revolutionary price in the previous period as well as the rising management expenses and sales expenses resulting from the Company’s rapid development led to a year-on-year decrease in the Company’s operating profit.

Third, minority gains/losses were involved as Leshi Zhixin and LeMall were non-wholly owned subsidiaries in the consolidation scope; the aforesaid companies remained in the red due to their business models or as they were in the stage of business development, and the resulting minority losses would lead to a slide in the net profits in the consolidated financial statements.

Fourth, advertising business and paid membership business attributable to the listed company are in the stage of rapid and stable development. In the future, the Company’s performance will maintain rapid and steady development with constant expansion of business scale.

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APPENDIX III

(II) Review of the Company’s businesses during the reporting period

1. Advantages in such aspects as traffic and user coverage have been further enhanced

The Company’s video website traffic, visitors and other key indicators continued to rise steadily. In 2016, daily average UV of the Company’s website exceeded 80 million, reaching a peak of nearly 110 million; daily average VV hit 390 million with a peak of 610 million.

Thanks to increasing terminal users brought by hot sales of smart terminal products, great series such as You Are My Sunshine (何以笙簫默), Growing Up Together (一起長大) and Finding Soul (超 少年密碼), self-produced series with high ratings, including Briefing Paper (整垮前女友), Breaking Bad Fortune Teller (絕命卦師) and Personal Assistant of Female President (女總裁的貼身高手), and external and self-produced variety shows such as Running Man (奔跑吧兄弟), Masked Singer (蒙面歌 王), Ace vs Ace (王牌對王牌), A Quick Glimpse of Running Man (極速奔跑吧), Want to on Mask (我 要上蒙面) and OMG CUI! (崔神駕到), which gained great audience response, the Company’s video website www.le.com maintained stable user viscosity and secured the first/second position for January-August 2016 and a forefront ranking for September-December 2016 in the 2016 VideoMetrix TOP 10 list for video websites’ daily average UV released by the third-party professional media monitoring platform comScore. (See relevant contents in “I. Main businesses in which the Company engaged during the reporting period” in “Summary of the Company’s businesses”.)

2. The rapid development of the platform effectively bolstered our businesses

The cloud video platform aims to create and share a global cloud ecology that centers on life, commerce and the society, build a vertically integrated ecology, i.e., cloud service (EaaS，Eco-as-a-Service) model in order to re-construct industry chain value. The platform provides leading professional video cloud services (e.g. CDN, cloud VOD, cloud Live and Data+), industry cloud services (e.g. broadcasting and television, education and sports), sharing cloud services (e.g. content sharing and issuance, live business), VR cloud platform and self-reliant cloud platform worldwide. So far, the platform has owned 750 CDN nodes and 30Tbps bandwidth reserve all across the world with millions of cloud lives for the year, hundred millions of daily device access, millions of concurrent users every second and successfully provided services to more than 100,000 corporate clients around the world, covering several billions of users.

3. Smart terminals have seen steady and rapid growth

The Company constantly endeavored to optimize each link of the supply chain of smart terminals including SuperTVs and improve productivity to satisfy strong demands for purchase by the massive consumers and hence succeeded in hitting the goal set in 2016. SuperTV product lines have been moving towards perfection day by day, marking full coverage in the mainstream, high-end and super high-end product market. In 2016, the Company consecutively launched new products - Super 4, which by applying the innovative technology of home network interaction, enabled TVs to understand users through super remote controllers and intelligently complete missions and orders given. Motion control by fingers or arms can replace external devices for playing games or controlling TVs, bringing smarter

— 544 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

experience to our consumers. Performance of the new products improved constantly with ever-perfecting user experience. SuperTVs took Chinese users’ habits into full consideration and brought conveniences to users through technological innovation. The Company will continue to re-define smart terminal products through vertical integration in order to provide ultimate user experience, introduce new products, set up an across-terminal LetvUI system and operate with constant iteration so as to hold onto the leading position in the industry and make the large-screened ecology system a home recreational center for users. In the meantime, the Company will release various types of accessories around the SuperTV product lines to support users’ demands for ultimate experience and introduce brand-new smart products in line with “quality life” apart from smart TVs when it is appropriate.

4. The Company continued to enrich upstream contents to create a unique content matrix

During the reporting period, the Company further stuck to the operational strategy of “Content matters” by means of “exclusive” + “non-exclusive” plus powerful content and enhanced the copyright advantages by going all out in subdivisions featuring differentiation and the self-production field to provide more delicate content services for numerous users and our fans. The Company managed to consolidate its advantages in the content domain with all-round coverage of contents such as TV series, movies, variety shows, animations and music and by combining external purchase and internal self-production. During the reporting period, www.le.com pooled plentiful great series such as You Are My Sunshine (何以笙簫默), Growing Up Together (一起長大) and Finding Soul (超少年密碼) while self-produced series Briefing Paper (整垮前女友), Breaking Bad Fortune Teller (絕命卦師) and Personal Assistant of Female President (女總裁的貼身高手) earned high ratings, and external and self-produced variety shows such as Running Man (奔跑吧兄弟), Masked Singer (蒙面歌王), Ace vs Ace (王牌對王牌), A Quick Glimpse of Running Man (極速奔跑吧), Want to on Mask (我要上蒙面) and OMG CUI ! (崔神駕到) gained great audience response. The combination of copyright and self-production made it possible to fully cover audience demands.

(III) Corporate internal control

The Company has continued to optimize and improve internal management, establish and perfect internal governance and organization structure and form scientific decision-making, implementation and monitoring mechanisms to ensure the Company’s business management complies with the laws and regulations and business activities are operated in an orderly manner, to improve operating efficiency and effectiveness and to realize development strategies. The Company has created a sound internal control environment, filled the gaps in management and eliminated hidden dangers, prevented, spotted in time and rectified erroneous acts, irregularities and frauds in a bid to secure the safety and completeness of the Company’s assets.

The Company runs effectively with complete qualifications including the Internet Content Provider License of the PRC , the Value-added Telecom Business License, the Radio and Television Program Production License , the Certificate for the Use of Short Message Service Access , the License for Audio-Video Programs Transmitted via Information Network , the Business License for Internet Culture , the License for Publishing on the Internet , the Internet Drug Information Service Certificate.

— 545 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

The Company has also further improved internal control systems in accordance with the regulatory authorities of listed companies and established effective and balanced decision-making, implementation and monitoring mechanisms to make sure that the implementation of the Company’s internal rules and regulations are in compliance with related national laws and regulations, departmental rules and normative documents.

The Company shall comply with the disclosure requirements set out in the Guidelines No.6 of the Shenzhen Stock Exchange on the Disclosure about Growth Enterprise Market — Internet Video Operation of Listed Companies :

See above

II. Main businesses analysis

1. Overview

Refer to “I. Overview” in the “Operation Discussion and Analysis”.

1. Revenue and cost

(1) Composition of operating revenue

Whether the Company needs to comply with the disclosure requirements for relevant businesses of the PV industry chain:

No

Whether the Company needs to comply with the disclosure requirements set out in the Guidelines No. 1 of the Shenzhen Stock Exchange on the Disclosure about Growth Enterprise Market — Broadcasting, Film and Television Operation of Listed Companies :

No

Whether Company needs to comply with the disclosure requirements set out in the Guidelines No. 5 of the Shenzhen Stock Exchange on the Disclosure about Growth Enterprise Market — Internet Game Operation of Listed Companies :

No

Whether the Company needs to comply with the disclosure requirements set out in the Guidelines No. 9 of the Shenzhen Stock Exchange on the Disclosure about Growth Enterprise Market — Relevant LED Industry Chain Operation of Listed Companies :

No

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MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

Whether the Company needs to comply with the disclosure requirements set out in the Guidelines No. 10 of the Shenzhen Stock Exchange on the Disclosure about Growth Enterprise Market — Medical Device Operation of Listed Companies :

No

Operating revenue Revenue from advertising business Revenue from terminal business Revenue from membership and distribution businesses Revenue from charging services Revenue from copyright businesses Revenue from TV plays release businesses Revenue from technological services Other operating revenue Total	2016 Amount Proportion in operating revenue 3,979,918,980.36 18.13% 10,116,826,298.57 46.09% 6,783,169,718.57 30.90% 5,600,440,015.12 25.51% 896,622,773.83 4.08% 286,106,929.62 1.30% 893,504,994.07 4.07% 177,262,412.40 0.81% 21,950,682,403.97 100.00%	2016 Amount Proportion in operating revenue 3,979,918,980.36 18.13% 10,116,826,298.57 46.09% 6,783,169,718.57 30.90% 5,600,440,015.12 25.51% 896,622,773.83 4.08% 286,106,929.62 1.30% 893,504,994.07 4.07% 177,262,412.40 0.81% 21,950,682,403.97 100.00%	Unit: RMB 2015 Year-on- year increase/ decrease Amount Proportion in operating revenue 2,633,677,836.17 20.23% 51.12% 6,088,833,693.67 46.78% 66.15% 3,782,359,728.95 29.06% 79.34% 2,710,141,070.62 20.82% 106.65% 776,088,695.58 5.96% 15.53% 296,129,962.75 2.27% -3.38% 151,172,563.14 1.16% 491.05% 360,681,302.19 2.77% -50.85% 13,016,725,124.12 100% 68.63%
		100.00%

• (2) Industries, products or regions contributing over 10% of operating revenue or operating profits of the Company

• Applicable � Not applicable

• (3) Whether the revenue of the Company from physical sales is higher than the labor revenue

• Yes � No

— 547 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

• (4) Performance of major sales agreements signed by the Company as at the reporting period

• Applicable � Not applicable

• (5) Composition of operating cost

Item cdn and bandwidth charges Salary and welfare Transportation and communication expenses Amortization cost Business entertainment Office allowance Others Advertising cost Terminal cost TV play and derivatives Total	2016 Amount Proportion in operating cost 932,832,725.89 5.12% 495,933,140.00 2.72% 34,100,090.07 0.19% 2,031,371,809.04 11.14% 10,420,691.37 0.06% 60,592,152.14 0.33% 26,828,299.30 0.15% 608,398,400.44 3.34% 13,958,252,087.53 76.57% 70,491,168.88 0.39% 18,229,220,564.66 100.00%	Unit: RMB 2015 Year-on- year increase/ decrease Amount Proportion in operating cost 472,147,581.74 4.25% 97.57% 235,954,819.36 2.12% 110.18% 12,660,115.02 0.11% 169.35% 1,543,817,811.48 13.89% 31.58% 8,337,588.79 0.08% 24.98% 27,140,127.72 0.24% 123.26% 41,184,229.18 0.37% -34.86% 489,951,422.94 4.41% 24.18% 8,185,920,966.49 73.67% 70.52% 94,894,461.12 0.85% -25.72% 11,112,009,123.84 100.00% 64.05%

• (6) Whether there is any change in the consolidation scope during the reporting period

� Yes □ No

In 2015, the Company held 30% equity and 67% voting rights of LeTV E-commerce (Beijing) Co., Ltd. (hereinafter referred to as “E-commerce”), so E-commerce was included in the scope of the consolidated financial statements. In October 2016, the Company transferred 15% equity held by it in E-commerce to Lerong Holdings (Beijing) Co., Ltd., after which the Company held 15% equity in E-commerce. This year, the income statement and the cash flow statement of E-commerce were included in the consolidation scope of the consolidated financial statements. At the end of the period, the balance sheet was no longer included in the consolidation scope and the impact from the equity transfer on the consolidated financial statements was recognized as capital reserve.

— 548 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

• (7) Relevant conditions on major changes or adjustments of company businesses, products or services during the reporting period

• Applicable � Not applicable

• (8) Conditions of major customers and major suppliers

Conditions of major customers of the Company

Total sales amount of the top five customers (RMB) 9,077,554,350.76 Proportion of total sales amount of the top five customers in the annual total sales amount 40.70% Proportion of sales amount of connected parties among the five top customers in the annual total sales amount 40.70%

Other conditions of major customers

□ Applicable � Not applicable

Conditions of major suppliers of the Company

Total purchase amount of the top five suppliers (RMB) 9,760,394,304.05 Proportion of total purchase amount of the top five suppliers in the annual total purchase amount 43.15% Proportion of purchase amount of connected parties among the top five suppliers in the annual total purchase amount 5.60%

Other conditions of major suppliers

• Applicable � Not applicable

— 549 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

3. Expenses

Unit: RMB

			Year-on-year
			increase/
Items	2016	2015	**decrease **	Descriptions on major changes
Sales expenses	2,365,883,026.28	1,040,736,778.35	127.33%	The Company’s business expansion,
				increasing advertising and promotion
				expenses and membership sharing
				expense, and sales development of
				smart terminals resulted in a rise in
				expenses for logistics and after-sales
				service.
Administrative	596,273,473.81	309,492,095.22	92.66%	To satisfy the Company’s rapid
expenses				development needs, many top talents
				were introduced during the reporting
				period and remuneration of managerial
				personnel of new buyout funds set up
				this year increased, resulting in a
				corresponding increase in salary and
				welfare expense; meanwhile, business
				expansion pushed up office and
				conference expenses and consulting
				expenses accordingly.
Financial expenses	648,027,100.05	348,979,599.08	85.69%	For RMB1.93 billion of bonds issued
				in a non-public manner in the second
				half of 2015, the interest for the full
				year was accrued during the reporting
				period, and the accrual period was
				longer than that of last year, leading to
				an increase in interest expense for the
				current period; meanwhile, to satisfy
				capital needs from rapid business
				development and reserve capital
				resources strategically, loans were
				increased, leading to rising interest
				expense.

— 550 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

4. R&D investment

� Applicable □ Not applicable

Expected impact on the Company’s future development

				Expected impact on the Company’s
**SN **	Items	Progress	Goals to be achieved	future development
1	Basic platform	Under continuous	Build Letv’s self-owned advertising	Further enhance liquidity of
	building	R&D	platform, cash out ecological	advertising revenue; strengthen
			placement resources; set up Letv’s	self-owned APP’s recommendation
			recommended system and provide	capability, improve user experience
			technological support for the	based on big data analysis, and
			Company’s products and services;	through the self-help Cloud video
			build Cloud video platform and help	platform, form basic customer bases
			customers solve technological barriers	for future content aggregation and
			in building video platform, and further	issue, and derivative services; reduce
			verify the reliability of cloud services	computing resources, storage resources
			from the perspective of application so	and broadband resources; significantly
			that the Cloud platform can support	cut broadband expense, and ensure
			Letv’s various business lines; unify	stable data transmission under various
			the Company’s transmission platform	network conditions to improve user
			and reduce repeated development of	experience.
			various terminals and modules.
2	Upgrading of	Under continuous	Relying on the Company’s strong	Seize market share and enhance user
	terminal products	R&D	operation strength, improve service	viscosity to make it a quality content
	and new product		performance, facilitate users’ search	operation platform; in line with the
	R&D		for content, improve content operation;	market development, replace old model
			develop and upgrade new products.	products to improve product
				competitiveness, and improve user
				experience.
3	CDN project	Under continuous	Develop new functions based on the	Improve the stability of network
		R&D	existing CDN; develop dispatching	operation and the utilization rate of
			system, improve server’s adaptation to	network resources and enhance data
			media format, enhance the efficiency	collection and analysis capacity. CDN
			and stability of logs reported in the	will be the foundation and guarantee
			CDN server, and develop CDN data	for the issue of the overall Letv’s
			analysis platform to satisfy the	ecological content to the whole world
			Company’s increasing needs and better	in future.
			serve applications on various service
			terminals.
4	Development of	Under continuous	Realize centralized management of	Reduce operation cost and error rate,
	other	R&D	members, commodities and orders, sell	improve revenue and renewal rate and
	business-related		commodities in any combination, and	unify the virtual commodity report
	systems		follow up orders; make expansion and	platform and user behavior trajectory,
			improvement in respect of cost	providing favourable support for the
			reduction, availability, accessibility,	Company’s decisions; improve user
			service guarantee, live streaming	experience to enhance user viscosity,
			delay, etc. to better serve business and	retain frequent users and develop new
			undertake external commercial	users, reduce operating cost and carry
			businesses.	out business operations externally.

— 551 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Amount of R&D investment and proportion thereof in operating revenue of the Company in recent three years

	2016	2015	2014
R&D staff size (person)	3,504	1,519	1,023
Proportion of R&D staff size	65.02%	31.10%	29.20%
Amount of R&D investment (RMB)	1,859,563,100.69	1,224,120,437.18	805,571,804.76
Proportion of R&D investment in
operating revenue	8.47%	9.40%	11.81%
Capitalized amount of R&D
expenditure (RMB)	1,178,084,159.69	731,874,814.33	482,539,370.55
Proportion of capitalized amount of
R&D expenditure in R&D investment	63.35%	59.79%	59.90%
Proportion of capitalized amount of
R&D expenditure in net profits of
current period	-530.93%	337.09%	374.65%

Reason for significant change in proportion of total R&D investment in operating revenue as compared with preceding year

□ Applicable � Not applicable

Reason for great change in capitalization rate of R&D investment and its reasonability description

□ Applicable � Not applicable

5. Cash flow

Unit: RMB

			Year-on-year
Items	2016	2015	increase/decrease
Subtotal of cash inflows from
operating activities	15,767,356,303.71	10,159,157,157.75	55.20%
Subtotal of cash outflows for
operating activities	16,835,417,072.67	9,283,455,281.29	81.35%
Net cash flow from operating
activities	-1,068,060,768.96	875,701,876.46	-221.97%
Subtotal of cash inflows from
investing activities	123,222,781.69	56,560,871.79	117.86%

— 552 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

			Year-on-year
Items	2016	2015	increase/decrease
Subtotal of cash outflows for
investing activities	9,798,602,373.95	3,041,311,028.39	222.18%
Net cash flows from investing
activities	-9,675,379,592.26	-2,984,750,156.60	224.16%
Subtotal of cash inflows from
financing activities	17,706,533,277.90	11,390,678,614.77	55.45%
Subtotal of cash outflows for
financing activities	8,229,033,503.90	7,025,329,507.77	17.13%
Net cash flows from financing
activities	9,477,499,774.00	4,365,349,107.00	117.11%
Net increase in cash and cash
equivalents	1,245,570,140.13	2,267,429,519.51	-154.93%

Description on major influential factors for year-on-year significant change of relevant data

• Applicable □ Not applicable

• 1) Net cash flows from operating activities in 2016 decreased 222% as compared with 2015, primarily because this year Leshi Zhixin Electronic Technology (Tianjin) Limited changed some of its external sales model for hardware from payment before delivery to adoption of sales account period but the purchase account period remained unchanged, resulting in negative overall operating cash flows.

• 2) Net cash flows from investing activities in 2016 increased 224% as compared with 2015, primarily because the net amount was down RMB6.69 billion as compared with last period; in particular, cumulative expenses for construction of fixed assets, purchase of copyright and R&D increased RMB2,661 million, expenses for external investment increased RMB3,517 million due to new investment in many companies and RMB560 million was paid for purchase of wealth management products.

• 3) Net cash flows from financing activities in 2016 rose 117% as compared with 2015, primarily ascribable to non-public issuance of shares by the Company and new fund companies’ absorption of investments this year.

Reasons for significant difference between net cash flows from operating activities of the Company during the reporting period and net profits of this year

• Applicable � Not applicable

• III. Non-main businesses

• Applicable � Not applicable

— 553 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

IV. Assets and liabilities

1. Major changes in asset composition

Unit: RMB

Items	**End **	of 2016	End of 2015	End of 2015
		Proportion		Proportion	Proportion
		in total		in total	increase/
	Amount assets		Amount	assets	decrease
Monetary funds	3,669,146,356.08	11.38%	2,729,778,115.14	16.07%	-4.69%
Accounts receivable	8,685,855,147.64	26.95%	3,359,683,070.34	19.78%	7.17%
Inventories	945,179,396.74	2.93%	1,138,787,425.07	6.71%	-3.78%
Long-term equity investment	2,070,302,115.59	6.42%	10,045,254.04	0.06%	6.36%
Fixed assets	1,140,315,635.02	3.54%	629,348,189.66	3.71%	-0.17%
Short-term loans	2,600,361,000.00	8.07%	1,735,000,000.00	10.22%	-2.15%
Long-term loans	3,024,445,808.89	9.38%	300,000,000.00	1.77%	7.61%

Dynamic u6, redefine the video pattern, terminal users are bound to enable the Company to monetize great amounts of traffic. Refer to II. 1 significant changes of major assets in Section III of this Report for the reasons for change.

2. Assets and liabilities measured at fair value

• Applicable □ Not applicable

Unit: RMB

Gain/loss

		Gain/loss
		from change	Cumulative	Impairment	Purchase
		in fair value	change in fair	withdrawn in	amount in the	Sales amount
	Opening	in the current	value stated	the current	current	in the current	Ending
Items	balance	period	as equity	period	period	period	balance
Financial assets
3. Available-for-sale
financial assets	85,748,670.26	-19,353,307.71	-14,280,357.12				66,395,362.55
Total of the above
items	85,748,670.26	-19,353,307.71	-14,280,357.12				66,395,362.55
Financial liabilities	0.00	0.00	0.00				0.00

Whether there is a significant change in measurement attributes of major assets of the Company during the reporting period

□ Yes � No

— 554 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

1. Restricted assets as at the end of the reporting period

2. Frozen part of the bank deposit balance at the end of the year was RMB24,307,102.45.

3. The security deposit for purchase of TCL’s equity was RMB2,127,500,000.00.

4. V. Investment analysis

5. General condition

6. Applicable □ Not applicable

Investment in the same Investment in the reporting period of the preceding year period (RMB) (RMB) Change 9,798,602,373.95 3,041,311,028.39 222.18%

1. Major equity investments obtained during the reporting period

2. Applicable � Not applicable

3. On-going major non-equity investments during the reporting period

4. Applicable � Not applicable

5. Financial assets measured at fair value

6. Applicable □ Not applicable

Unit: RMB

			Gain/loss
			from change	Cumulative	Purchase	Sales
			in fair value	change in	amount	amount
		Initial	in the	fair value	during the	during the	Cumulative
		investment	current	stated as	reporting	reporting	investment	Ending	Capital
**Asset **	category	cost	period	equity	period	period	revenue	balance	source
Stock		80,675,719.67	-19,353,307.71	-19,353,307.71	0.00	0.00	-14,280,357.12	66,395,362.55	Equity funds
Total		80,675,719.67	-19,353,307.71	-19,353,307.71	0.00	0.00	-14,280,357.12	66,395,362.55	—

5. Utilization condition of raised funds

• Applicable □ Not applicable

— 555 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Overall utilization condition of raised funds	�Applicable □Not applicable	Unit: RMB’0,000	Total Proportion	amount of of	Total raised Accumulated accumulated Amount of	amount of Total funds with total total Intended raised	raised amount of purpose amount of amount of Total use and funds that	Total funds used raised changed in raised raised amount of direction of have been	Year of amount of in the funds the funds with funds with unused unused laid idle for	fund Way of raised current accumulatively reporting purpose purpose raised raised over two	raising fund raising funds period used period changed changed funds funds years	2016 Non-public 480,000 310,789.29 368,248.49 0 0 0.00% 103,689.04 The 0	issuance of Company	shares managed the	raised funds	under	special	account and	used the	funds for	designated	purpose	Total — 480,000 310,789.29 368,248.49 0 0 0.00% 103,689.04 — 0	Description of general use of raised funds	The total funds raised were RMB4,800 million, and after deduction of issue expenses of RMB83.24 million, the net funds raised were RMB4,716.76 million (Note: The	legal service fee and audit service fee totalling RMB560,000 included in the issue expenses were paid via other account; therefore, the actual net funds in the fundraising	account were RMB4,717.32 million). As at the end of 2016, the Company used raised funds of RMB3,682,484,900 on a cumulative basis and the unused raised funds	were RMB1,036,890,400 (including interest revenue of RMB2,063,500).
(1)

— 556 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

	Unit: RMB’0,000	Whether the Accumulated Date when Whether	projects are Total amount Investment the projects material	changed Total amount investment Amount invested as progress as reach the Benefits Whether the changes	(including of raised after invested in at the end of at the end of intended achieved in anticipated appear in	partial funds to be adjustment the reporting the period the period condition for the reporting results are project	change) invested (1) period (2) (3)＝(2)/(1) use period achieved feasibility		No 40,000 40,000 22,045.82 27,973.86 69.93% — — — No	No 40,000 36,184 24,522.63 34,660.35 95.79% — — — No	No 400,000 395,548 264,220.84 305,614.27 77.26% — — — No	— 480,000 471,732 310,789.29 368,248.48 — — — —	— 480,000 471,732 310,789.29 368,248.48 — — 0 — —	Not applicable		No significant change	Not applicable	Not applicable		Not applicable		Applicable	The actual up-front investment in projects invested in with raised funds with the Company’s self-raised funds was RMB1,320,158,500, including	RMB959,671,400 for building of video content resource pool, RMB226,465,700 for R&D of platform application technology, and RMB134,021,400	for building of brand marketing system. The Company completed replacement of the aforesaid up-front investment with raised funds.
�Applicable □Not applicable						Projects to be invested in and investment direction of	over-raised funds	Projects to be invested in	Building of brand marketing system	R&D of platform application technology	Building of video content resource pool	Subtotal of projects to be invested in	Total	Failure to reach planned progress or anticipated results and	the reasons thereof (specific project)	Description about material changes in project feasibility	Amount, purpose and use progress of the over-raised funds	Change in place of implementation of projects invested in	with raised funds	Adjustment of method for implementation of projects	invested in with raised funds	Up-front investment and replacement of projects invested	in with raised funds

— 557 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Whether the Accumulated Date when Whether	projects are Total amount Investment the projects material	changed Total amount investment Amount invested as progress as reach the Benefits Whether the changes	(including of raised after invested in at the end of at the end of intended achieved in anticipated appear in	partial funds to be adjustment the reporting the period the period condition for the reporting results are project	change) invested (1) period (2) (3)＝(2)/(1) use period achieved feasibility		Applicable	Refer to “V. problems in use and disclosure of raised funds” in the specific report on deposit and use of raised funds in 2016	Not applicable		The balance for building of video content resource pool was RMB900,988,900, the balance for R&D of platform application technology was	RMB15,374,000 and the balance for building of brand marketing system was RMB120,527,500, which were deposited in various accounts	exclusively for raised funds.	Refer to “V. problems in use and disclosure of raised funds” in the specific report on deposit and use of raised funds in 2016
				Projects to be invested in and investment direction of	over-raised funds	Projects to be invested in	Temporary supplement of working capital with idle raised	funds	Amount of surplus raised funds in project implementation	and the reasons thereof	Intended use and direction of unused raised funds			Problems or other conditions in use and disclosure of	raised funds

— 558 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

(3) Changes in use of raised funds

• Applicable � Not applicable

No change in use of raised funds by the Company during the reporting period.

• VI. Sales of material assets and equity

1. Sales of material assets

□ Applicable � Not applicable

No sales of material assets by the Company during the reporting period.

2. Sales of material equity

□ Applicable � Not applicable

VII. Analysis of main holding and shareholding companies

• Applicable □ Not applicable

Information about major subsidiaries and shareholding companies contributing more than 10% of the Company’s net profit

Unit: RMB

Company			Registered			Operating	Operating
name	Company type	Main business	capital	Total assets	Net assets	revenue	profit	Net profit
Leshi Zhixin	Subsidiary	Production and	265,040,001.00	10,880,700,191.70	-799,987,140.57	16,081,572,929.21	-855,550,208.58	-635,656,753.31
Electronic		sales of products
Technology
(Tianjin)
Limited
LeCloud	Subsidiary	Data processing,	795,143,958.00	2,213,015,216.64	1,396,708,510.01	1,201,397,654.21	-54,055,817.79	-17,619,903.34
Computing		software
Co., Ltd.		development
LeTV	Subsidiary	IT	360,000,00.00	4,306,050,530.06	776,587,581.58	948,478,609.66	143,467,765.07	135,657,859.41
Information
Technology
(Tianjin)
Co., Ltd.
Dongyang	Subsidiary	Film & TV culture	100,000,000.00	750,617,174.76	615,117,399.74	266,586,735.92	140,753,050.34	120,603,119.51
LeTV
Flower Film
& TV Co.,

Ltd.

— 559 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Company			Registered			Operating	Operating
name	Company type	Main business	capital	Total assets	Net assets	revenue	profit	Net profit
Khorgos Letv	Subsidiary	Membership	10,000,000.00	2,394,994,836.69	267,290,029.54	2,982,434,587.84	171,494,352.16	171,494,352.16
New		business
Generation
Culture
Media Co.,
Ltd.
LeTV	Subsidiary	E-commerce	10,000,000.00			4,898,685,585.57	-736,158,230.77	-736,888,088.63
E-commerce
(Beijing)
Co., Ltd.

Acquirement and disposal of subsidiaries during the reporting period

� Applicable □ Not applicable

Way of acquiring and disposing of subsidiaries in Company name the reporting period

LeTV E-commerce (Beijing) In 2015, the Company held 30% Co., Ltd. equity and 67% voting rights of LeTV E-commerce (Beijing) Co., Ltd., so E-commerce was included in the scope of the consolidated financial statements. In October 2016 the Company transferred 15% equity held by it in E-commerce to Lerong Holdings (Beijing) Co., Ltd., after which the Company held 15% equity in E-commerce.

Impact on the overall production & operation and operating results

This year, the income statement and the cash flow statement of E-commerce were included in the consolidation scope of the consolidated financial statements. At the end of the period, the balance sheet was no longer included in the consolidation scope and the impact from the equity transfer on the consolidated financial statements was recognized as capital reserve.

VIII. Structured entities controlled by the Company

• Applicable � Not applicable

— 560 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

IX. Outlook for the Company’s future development

(I) Future overall strategy

The internet video industry in which the Company operates develops rapidly amid fierce competition and therefore has extremely high requirements for innovation and reform. In recent years, the Company has been committed to building the “platform+content+hardware+software+application” “Letv business ecosystem”. With the content as the basis, the Company strengthened the development and application of relevant value-added services and brought exquisite experiences to users through multiscreen terminals such as television, PC, mobile, tablet, etc. under the integrated layout of leading technological advantages of multiple screens and the vertical industrial chain of Letv ecology. The Company will keep expanding the upstream and downstream along the industrial chain and peripheral services, releasing and implementing different important strategies, enhancing and improving “Letv ecology”, building up brand recognition and user scale, and promoting the rapid development of various main businesses. At present, the Letv ecology gradually built up by the Company has formed strong compatibility and expandability, and the operation mechanism of close collaboration among various ecoelements is more effective than independent operation of single management elements. In the future, the Company will conduct systematic development centering on “Letv ecology”, and further improve the competitive advantages of Letv ecology, strengthen its risk resistance capability and expand its growth space through “endogenous and extensive development”.

In 2017, the Company will make further improvement to realize ecologicalization from chains to nodes, such as ecological content structure, ecological platform, ecological terminal, ecological application, ecological organization and ecological marketing to achieve sizeable and powerful synergy and usher in a globalization process thoroughly. Through ecological synergy, the Company makes effort to get users and meet their needs to the greatest extent and change people’s Internet lifestyle, so as to create a high-quality life circle for Letv fans and further promote the rapid growth of revenue from various main businesses.

(II) Operational objectives for business areas of the Company for the year 2017

(1) Platform

As for LeCloud platform, in the beginning of 2016, LeCloud had finished staged financing with “Chongqing Strategic Fund” as its strategic investor, which fully reflected the recognition of the leading and unique ecological model of LeCloud by Chongqing. The cooperation between LeCloud and Chongqing further embodies the deep-going cooperation between Letv and local government. By virtue of Chongqing’s influence as a national central city and financial center in the upper reaches of the Yangtze River, not only can Letv’s market share in the southwest region be boosted, but also Letv ecology can gain a foothold and make a layout in the southwest region. Based on its open closed-loop ecology, in the upcoming year, LeCloud platform will go full blast in terms of product R&D, service optimization, market exploration, global layout, etc., and by means of the aforesaid cooperation with the local government, propel LeCloud toward a future-oriented ecological economy mode, constructing a global cloud ecology.

— 561 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

(2) Content

In 2017, Letv will continually work hard for holding its first ranking in the field of long videos. Le.com will increase input in resources like copyright, self-made content, music, movies, etc., to lay a solid foundation for ecological content operation in 2017. In addition, on the strength of its ecology, Letv will try to extend the life cycle of its content indefinitely through various content forms, making its audience base increase progressively, and present its content fully on multi-screen terminals, digging deeper into its operation value, to form a chain large-scale commercial effect of “grand production, macro ecology and great influence”.

(3) Hardware

In 2017, Letv will continually develop smart terminal products through vertical integration to provide exceptional customer services. The concrete details include enriching and improving the product line of SuperTV and launching a new generation of smart TV, to further popularize the full-fledged smart big screen TVs; building a cross-end Letv UI system as well as updating it continuously and operating it iteratively, to remain its leading position in this industry and make the big screen ecological system become the family entertainment center of the users in real sense; meanwhile, introducing various accessories centering on the product line of SuperTV to satisfy consumers’ need for ultimate experience; bringing out brand new smart products conforming to the concept of “quality life” besides SuperTV at the right time. In 2017, Letv plans to sell 7 million smart terminals including SuperTVs.

(4) Software + application

In respect of mobile terminal application products, Letv will keep enhancing data flow of mobile terminals as well as enriching and optimizing the product matrix in mobile terminals, to provide a better user experience unceasingly, make user amount and its industry ranking advance rapidly, and as a result, keep in step with user requirements and market trend, and to perfect Letv ecology further.

Regarding the market of applications, Letv will make further improvement on the amount of applications, provide better user experience, give strong backing to more developers of products related to big screen, open the way for the commercial exploration of the application market, in order to continue to retain its top spot. In addition, Letv will make effective layout such as various new application technologies and other aspects to achieve its strategic position in the domain of big screen core applications.

Section V Important Matters

XIV. Implementation of the Company’s equity incentive plan, employee stock ownership plan or other employee incentive measures

• Applicable □ Not applicable

— 562 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

(I) The first equity incentive plan

On March 1st, 2016, the 13th meeting of the 3rd Board of Directors of the Company deliberated and approved the Proposal on Extension of the Third Exercise Period of the Company’s First Equity Incentive Plan . The third exercise period of the Company’s first equity incentive plan was from April 15th, 2015 to April 14th, 2016 (which was deliberated and approved at the 3rd meeting of the 3rd Board of Directors). Under the influence of suspension caused by material asset restructuring, the third exercise of stock options under the first equity incentive plan might not be conducted within the originally planned exercise period. To ensure that the Company’s equity incentive plan can be carried out smoothly, safeguard the incentive targets’ rights and interests and promote the Company’s long-term stable development, the Company decided to extend the third exercise period of the first equity incentive plan to June 30th, 2016. On March 15th, 2016, the second extraordinary general meeting 2016 deliberated and approved the said proposal.

The Company’s general meeting 2015 deliberated and approved the profit distribution plan 2015 and the equity distribution was completed on May 3rd, 2016. As authorized by the Company’s general meeting, the Board of Directors adjusted the exercise price of stock options under the first plan. Upon adjustment, the exercise price was RMB3.584. On May 17th, 2016, the 19th meeting of the 3rd Board of Directors of the Company deliberated and approved the Proposal on Adjustment of the Exercise Price of Stock Options under the Company’s First Equity Incentive Plan .

On September 30th, 2016, the 29th meeting of the 3rd Board of Directors of the Company deliberated and approved the Proposal on Cancellation of Stock Options of Some Incentive Targets under the Company’s First Equity Incentive Plan and Adjustment of the Number of Stock Options . As the incentive targets under the Company’s first equity incentive plan, i.e., Wang Qian and Dong Zhijian, left the Company for personal reasons, according to the Company’s First Stock Option Incentive Plan and relevant provisions, the Board of Directors disqualified the two persons as incentive targets and cancelled the unexercised 83,391 stock options already granted to them. Upon adjustment, the number of incentive targets under the first equity incentive plan was 169. According to the provisions of the Company’s First Stock Option Incentive Plan and the Memorandum No. 8 on Growth Enterprise Board Information Disclosure: Equity Incentive Plan , the 83,391 stock options would be cancelled. Upon adjustment, the number of stock options originally granted to the 169 persons was 43,466,566, and the number of remaining unexercised stock options was 13,039,969.

On the same day, the 29th meeting of the 3rd Board of Directors deliberated and approved the Proposal on Exercise of the Fourth Exercise Period of the Company’s First Equity Incentive Plan . According to the Company’s Revision of the First Stock Option Incentive Plan (Draft) and the evaluation results of the First Stock Option Incentive Plan Evaluation Management Measures , the Board of Directors of the Company realized that the exercising conditions of the fourth exercise period of stock options under the first equity incentive plan were met and agreed to grant a total of 13,039,970 stock options exercisable in the fourth exercise period to 169 incentive targets by issuing the Company’s stocks to particular investors.

— 563 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

Announcement indexes relating to the first equity incentive plan during the reporting period are as follows:

	Announcement
Published on	No.	Content	Published in
March 1st, 2016	2016-018	Announcement on	www.cninfo.com.cn
		resolution of the 13th
		meeting of the 3rd Board
		of Directors
March 15th, 2016	2016-027	Announcement on	www.cninfo.com.cn
		resolution of the second
		extraordinary general
		meeting 2016
May 17th, 2016	2016-059	Announcement on	www.cninfo.com.cn
		resolution of the 19th
		meeting of the 3rd Board
		of Directors
May 17th, 2016	2016-061	Announcement on	www.cninfo.com.cn
		adjustment of the exercise
		price of stock options
		under the Company’s first
		equity incentive plan
September 30th, 2016	2016-116	Announcement on	www.cninfo.com.cn
		resolution of the 29th
		meeting of the 3rd Board
		of Directors
September 30th, 2016	2016-118	Announcement on	www.cninfo.com.cn
		cancellation of stock
		options of some incentive
		targets under the
		Company’s first equity
		incentive plan and
		adjustment of the number
		of stock options
September 30th, 2016	2016-119	Announcement on	www.cninfo.com.cn
		exercise of the fourth
		exercise period of the
		Company’s first equity
		incentive plan

— 564 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

	Announcement
Published on	No.	Content	Published in
October 14th, 2016	2016-124	Announcement on	www.cninfo.com.cn
		completion of
		cancellation of some
		stock options

(II) Equity options subject to first grant under the second equity incentive plan

On May 24th, 2016, the 20th meeting of the 3rd Board of Directors of the Company deliberated and approved the Proposal on Adjustment of the Exercise Price of and Number of Stock Options Subject to First Grant under the Company’s Second Equity Incentive Plan and Cancellation of Some Incentive Targets’ Stock Options . As three incentive targets relating to stock options subject to first grant under the Company’s second equity incentive plan, i.e., Wang Rong, Pao Nan and Ma Xiaoou, did not exercise their combined 44,460 stock options during the first exercise period for personal reasons, according to the Company’s Second Stock Option Incentive Plan and the Memorandum No. 8 on Growth Enterprise Board Information Disclosure: Obtaining, Granting, Exercise and Adjustment of Equity Incentive (Stock Options) , the 44,460 stock options would be cancelled.

As 19 incentive targets relating to stock options subject to first grant under the Company’s second equity incentive plan, i.e., Chen Feng, Xiang Haixin, Huang Tiangang, Zhang Guilin, Liu Xingfu, Liu Bo, Yu Fengdong, Li Gang, Liu Bin, Cai Xianglun, Zhang Kun, Wang Jingjing, Li Ge, Ren Xialin, Zheng Fei, Zheng Jinghu, Wang Qian, Zhang Wei and Wang Hui, left the Company for personal reasons, according to the Company’s Second Stock Option Incentive Plan and relevant provisions, the Board of Directors disqualified the 19 persons including Chen Feng as incentive targets and cancelled the remaining unexercised 1,159,840 stock options already granted to them. Upon adjustment, the number of incentive targets relating to stock options subject to first grant under the second equity incentive plan was 300. According to the provisions of the Company’s Second Stock Option Incentive Plan and the Memorandum No. 8 on Growth Enterprise Board Information Disclosure: Obtaining, Granting, Exercise and Adjustment of Equity Incentive (Stock Options) , the 1,159,840 stock options would be cancelled. Upon adjustment, the number of stock options originally granted to the 300 persons was 25,757,600, and the number of unexercised stock options was 20,606,080.

The Company’s general meeting 2015 deliberated and approved the profit distribution plan 2015 and the equity distribution was completed on May 3rd, 2016. As authorized by the Company’s general meeting, the Board of Directors adjusted the exercise price of stock options subject to first grant under the Company’s second equity incentive plan. Upon adjustment, the exercise price of stock options subject to first grant under the second equity incentive plan was RMB5.511.

Meanwhile, the 20th meeting of the 3rd Board of Directors deliberated and approved the Proposal on Exercise of the Second Exercise Period of Stock Options Subject to First Grant under the Company’s Second Equity Incentive Plan . According to the Company’s Second Stock Option Incentive Plan and the evaluation results of the Second Stock Option Incentive Plan Evaluation Management Measures , the Board of Directors of the Company realized that the exercising conditions of the second

— 565 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

exercise period of stock options subject to first grant under the Company’s second stock option incentive plan were met and agreed to grant a total of 5,151,520 stock options exercisable in the second exercise period to 300 incentive targets by issuing the Company’s stocks to particular investors.

On September 30th, 2016, the 29th meeting of the 3rd Board of Directors of the Company deliberated and approved the Proposal on Adjustment of the Number of Stock Options Subject to First Grant under the Company’s Second Equity Incentive Plan and Cancellation of Some Incentive Targets’ Stock Options . As four incentive targets relating to stock options subject to first grant under the Company’s second equity incentive plan, i.e., Chang Jia, Wen Huihui, Ma Xiaoou and Ling Yafei, did not exercise their combined 56,760 stock options during the second exercise period for personal reasons, according to the Company’s Second Stock Option Incentive Plan (Draft Revision) and the Memorandum No. 8 on Growth Enterprise Board Information Disclosure: Equity Incentive Plan , the 56,760 stock options would be cancelled.

As 11 incentive targets relating to stock options subject to first grant under the Company’s second equity incentive plan, i.e., Chang Jia, Xue Wei, Zhou Wei, Ling Yafei, Wen Huihui, Jiang Bo, Xu Yajuan, Li Qingbo, Jin Qu, Wang Baoxin and Fu Qiang, left the Company for personal reasons, according to the Company’s Second Stock Option Incentive Plan (Draft Revision) and relevant provisions, the Board of Directors disqualified the 11 persons as incentive targets and cancelled the remaining unexercised 493,680 stock options already granted to them. Upon adjustment, the number of incentive targets relating to stock options subject to first grant under the second equity incentive plan was 289. According to the Company’s Second Stock Option Incentive Plan (Draft Revision) and the Memorandum No. 8 on Growth Enterprise Board Information Disclosure: Equity Incentive Plan , the 493,680 stock options would be cancelled. Upon adjustment, the number of stock options originally granted to the 289 persons was 24,934,800, and the number of unexercised stock options was 14,960,880.

On the same day, the 29th meeting of the 3rd Board of Directors deliberated and approved the Proposal on Exercise of the Third Exercise Period of Stock Options Subject to First Grant under the Company’s Second Equity Incentive Plan . According to the Company’s Second Stock Option Incentive Plan and the evaluation results of the Second Stock Option Incentive Plan Evaluation Management Measures , the Board of Directors of the Company realized that the exercising conditions of the third exercise period of stock options subject to first grant under the Company’s second stock option incentive plan were met and agreed to grant a total of 7,480,440 stock options exercisable in the third exercise period to 289 incentive targets by issuing the Company’s stocks to particular investors.

— 566 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

Announcement indexes relating to stock options subject to first grant under the second equity incentive plan during the reporting period are as follows:

	Announcement
Published on	No.	Content	Published in
May 24th, 2016	2016-063	Announcement on	www.cninfo.com.cn
		resolution of the 20th
		meeting of the 3rd Board
		of Directors
May 24th, 2016	2016-065	Announcement on	www.cninfo.com.cn
		adjustment of the exercise
		price and number of stock
		options subject to first
		grant under the
		Company’s second equity
		incentive plan and
		cancellation of some
		incentive targets’ stock
		options
May 24th, 2016	2016-066	Announcement on	www.cninfo.com.cn
		exercise of the second
		exercise period of stock
		options subject to first
		grant under the
		Company’s second equity
		incentive plan
May 30th, 2016	2016-070	Announcement on	www.cninfo.com.cn
		completion of
		cancellation of some
		stock options under the
		second equity incentive
		plan
September 30th, 2016	2016-116	Announcement on	www.cninfo.com.cn
		resolution of the 29th
		meeting of the 3rd Board
		of Directors

— 567 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

	Announcement
Published on	No.	Content	Published in
September 30th, 2016	2016-120	Announcement on	www.cninfo.com.cn
		adjustment of the number
		of stock options subject
		to first grant under the
		Company’s second equity
		incentive plan and
		cancellation of some
		incentive targets’ stock
		options
September 30th, 2016	2016-121	Announcement on	www.cninfo.com.cn
		exercise of the third
		exercise period of stock
		options subject to first
		grant under the
		Company’s second equity
		incentive plan
October 14th, 2016	2016-124	Announcement on	www.cninfo.com.cn
		completion of
		cancellation of some
		stock options

(III) Reserved stock options under the second equity incentive plan

The Company’s general meeting 2015 deliberated and approved the profit distribution plan 2015 and the equity distribution was completed on May 3rd, 2016. As authorized by the Company’s general meeting, the Board of Directors adjusted the exercise price of reserved stock options under the Company’s second equity incentive plan. Upon adjustment, the exercise price was RMB19.1572. On May 17th, 2016, the 19th meeting of the 3rd Board of Directors of the Company deliberated and approved the Proposal on Adjustment of the Exercise Price of Reserved Stock Options under the Company’s Second Equity Incentive Plan .

On September 30th, 2016, the 29th meeting of the 3rd Board of Directors of the Company deliberated and approved the Proposal on Adjustment of the Number of Reserved Stock Options under the Company’s Second Equity Incentive Plan and Cancellation of Some Incentive Targets’ Stock Options . As two incentive targets relating to reserved stock options under the Company’s second equity incentive plan, i.e., Yang Lingling and Zhou Lulu, did not exercise their combined 13,200 stock options during the first exercise period for personal reasons, according to the Company’s Second Stock Option Incentive Plan (Draft Revision) and the Memorandum No. 8 on Growth Enterprise Board Information Disclosure: Equity Incentive Plan , the 13,200 stock options would be cancelled.

— 568 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

As six incentive targets relating to reserved stock options under the Company’s second equity incentive plan, i.e., Zhou Lulu, Yang Lingling, Qi Shudong, Sun Ke, Xiang Maohua and Wang Ting, left the Company for personal reasons, according to the Company’s Second Stock Option Incentive Plan and relevant provisions, the Board of Directors disqualified the six persons as incentive targets and cancelled the unexercised 200,200 stock options already granted to them. Upon adjustment, the number of incentive targets relating to reserved stock options under the second equity incentive plan was 54. According to the provisions of the Company’s Second Stock Option Incentive Plan and the Memorandum No. 8 on Growth Enterprise Board Information Disclosure: Equity Incentive Plan , the 200,020 stock options would be cancelled. Upon adjustment, the number of unexercised reserved stock options was 1,706,320.

Meanwhile, the 29th meeting of the 3rd Board of Directors deliberated and approved the Proposal on Exercise of the Second Exercise Period of Reserved Stock Options under the Company’s Second Equity Incentive Plan . According to the Company’s Revision of the Second Stock Option Incentive Plan (Draft) and the evaluation results of the Second Stock Option Incentive Plan Evaluation Management Measures , the Board of Directors of the Company realized that the exercising conditions of the second exercise period of reserved stock options under the Company’s second stock option incentive plan were met and agreed to grant a total of 731,280 stock options exercisable in the second exercise period to 54 incentive targets by issuing the Company’s stocks to particular investors.

Announcement indexes relating to reserved stock options under the second equity incentive plan during the reporting period are as follows:

	Announcement
Published on	No.	Content	Published in
May 17th, 2016	2016-059	Announcement on	www.cninfo.com.cn
		resolution of the 19th
		meeting of the 3rd Board
		of Directors
May 17th, 2016	2016-062	Announcement on	www.cninfo.com.cn
		adjustment of the exercise
		price of reserved stock
		options under the
		Company’s second equity
		incentive plan
September 30th, 2016	2016-116	Announcement on	www.cninfo.com.cn
		resolution of the 29th
		meeting of the 3rd Board
		of Directors

— 569 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

	Announcement
Published on	No.	Content	Published in
September 30th, 2016	2016-122	Announcement on	www.cninfo.com.cn
		adjustment of the number
		of reserved stock options
		under the Company’s
		second equity incentive
		plan and cancellation of
		some incentive targets’
		stock options
September 30th, 2016	2016-123	Announcement on	www.cninfo.com.cn
		exercise of the second
		exercise period of
		reserved stock options
		under the Company’s
		second equity incentive
		plan
October 14th, 2016	2016-124	Announcement on	www.cninfo.com.cn
		completion of
		cancellation of some
		stock options

(IV) The third equity incentive plan

On November 2nd, 2016, the Company issued the Announcement on Completion of Registration of Stock Options under the Company’s Equity Incentive Plan . Upon review and confirmation by Shenzhen Branch of China Securities Depository and Clearing Corporation Limited, the Company completed registration of 18.56 million stock options subject to first grant under the Third Stock Option Incentive Plan (Draft) of Leshi Internet Information & Technology Corp (Beijing) , abbreviation of stock option: LetvJLC4, code of stock option: 036232.

Announcement index relating to the third equity incentive plan during the reporting period is as follows:

ws:
			Announcement
**Published **	on		No.	Content	Published in
November	2nd,	2016	2016-137	Announcement on	www.cninfo.com.cn
				completion of registration
				of stock options under the
				Company’s third equity
				incentive plan

— 570 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

(IV) The first employee stock ownership plan

On July 28th, 2016, the Company launched the first employee stock ownership plan. The 25th meeting of the 3rd Board of Directors deliberated and approved the Proposal on and Summary Thereof and Proposal on Requesting the General Meeting to Authorize the Board of Directors to Handle Relevant Matters of the Company’s Employee Stock Ownership Plan ; moreover, on August 16th, 2016, the Company’s fourth extraordinary general meeting 2016 deliberated and approved the aforesaid two proposals.

On September 8th, 2016, the 28th meeting of the 3rd Board of Directors deliberated and approved the Proposal on Amendment of and Summary Thereof . According to the Company’s actual condition and the general meeting’s authorization and in light of the intents of senior executives and core personnel participating in the employee stock ownership plan, the Company changed the first employee stock ownership plan, with the ratio of preferred shares and deferred shares in the collective plan adjusted as 1:1, and the cap of 510 million shares remaining unchanged. After establishment of the employee stock ownership plan, the Company entrusted China Resources Szitic Trust Co., Ltd. as the manager. Relevant adjustment this time would not have any material impact on the overall progress of the employee stock ownership plan.

On September 20th, 2016, the Company issued the Announcement on Completion of Shareholding Increase for the First Employee Stock Ownership Plan . As at the date of disclosure of announcement, the Company’s first employee stock ownership plan cumulatively bought in 10,953,541 stocks through auction trading on the secondary market, with the turnover of RMB509,998,510.27 and average transaction price of RMB46.61. The stocks bought in took up about 0.55% of the Company’s total share capital. The stock buy-in under the Company’s first employee stock ownership plan was completed, and the lock-up period for the stocks bought in under the plan is from September 20th, 2016 to September 19th, 2017 (one year).

Announcement indexes relating to the first employee stock ownership plan during the reporting period are as follows:

	Announcement
Published on	No.	Content	Published in
July 28th, 2016	2016-091	Announcement on	www.cninfo.com.cn
		resolution of the 25th
		meeting of the 3rd Board
		of Directors

— 571 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

	Announcement
Published on	No.	Content	Published in
July 28th, 2016		The first employee stock	www.cninfo.com.cn
		ownership plan (draft) of
		Leshi Internet
		Information &
		Technology Corp
		(Beijing)
July 28th, 2016		Summary of the first	www.cninfo.com.cn
		employee stock ownership
		plan (draft) of Leshi
		Internet Information &
		Technology Corp
		(Beijing)
August 16th, 2016	2016-103	Announcement on	www.cninfo.com.cn
		resolution of the fourth
		extraordinary general
		meeting 2016
September 8th, 2016	2016-110	Announcement on	www.cninfo.com.cn
		resolution of the 28th
		meeting of the 3rd Board
		of Directors
September 8th, 2016		The first employee stock	www.cninfo.com.cn
		ownership plan (draft
		revision) of Leshi
		Internet Information &
		Technology Corp
		(Beijing)
September 8th, 2016		Summary of the first	www.cninfo.com.cn
		employee stock ownership
		plan (draft revision) of
		Leshi Internet
		Information &
		Technology Corp
		(Beijing)
September 9th, 2016	2016-112	Supplementary	www.cninfo.com.cn
		announcement on the
		Company’s first employee
		stock ownership plan
		(draft revision)

— 572 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Announcement Published on No. Content Published in September 20th, 2016 2016-114 Announcement on www.cninfo.com.cn completion of shareholding increase for the first employee stock ownership plan

Section VIII Directors, Supervisors, Senior Executives and Employees

IV. Remuneration of directors, supervisors and senior executives

Procedure for making decisions on, basis for determining and actual payment of remuneration of directors, supervisors and senior executives

Procedure for making The allowances for Company’s directors and supervisors are decisions on determined upon evaluation organized by the Board of remunerations of Directors and the remuneration of senior executives is directors, supervisors and determined by the Board of Directors; the remuneration of senior executives directors, supervisors and senior executives serving in the Company should be paid by the Company. The allowance for independent directors is determined based on the resolutions made at the general meeting.

• Basis for determining remuneration of directors, supervisors and senior executives

• Actual payment of remuneration of directors, supervisors and senior executives

The remuneration is determined according to the Company’s profitability, division of work and performance of directors, supervisors and senior executives

The salary of the Company’s directors, supervisors and senior executives has been paid according to the annual salary plan, and the Company actually paid the remuneration of RMB12.02 million in 2016

— 573 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Remuneration of directors, supervisors and senior executives of the Company during the reporting period

Unit: RMB’0,000

						Whether the
						director/supervisor/
						senior executive
					Total pre-tax	obtains
					remuneration	remuneration from
				Incumbent	obtained from the	the Company’s
Name	Post	Sex	Age	or not	Company	connected party
Jia Yueting	Chairman and general	Male	44	Incumbent	51	Yes
	manager
Han Fangming	Vice chairman	Male	51	Incumbent	75	No
Liu Hong	Director and deputy	Male	44	Incumbent	60	No
	general manager
Zhu Ning	Independent director	Male	44	Incumbent	14	No
Cao Bin	Independent director	Male	46	Incumbent	14	No
Wu Meng	Chairman of the Board of	Male	42	Incumbent	39	No
	Supervisors
Ji Xiaoqing	Supervisor	Female	37	Incumbent	0	Yes
Tian Bingxin	Supervisor	Male	61	Incumbent	0	No
Liang Jun	Deputy general manager	Male	47	Incumbent	120	No
Gao Fei	Deputy general manager	Male	41	Incumbent	126	No
Zhang Minhui	Deputy general manager	Male	39	Incumbent	120	No
Yuan Bin	Deputy general manager	Male	41	Incumbent	95	No
Yang Yongqiang	Deputy general manager	Male	42	Incumbent	48	No
Wu Yazhou	Deputy general manager	Male	41	Incumbent	127	No
Jiang Xiaolin	Deputy general manager	Female	42	Incumbent	59	No
Tan Shu	Deputy general manager	Female	42	Incumbent	90	No
Jin Jie	Deputy general manager	Male	45	Incumbent	65	No
Yang Lijie	Chief financial officer	Female	42	Incumbent	54	No
Zhao Kai	Board secretary	Male	31	Incumbent	45	No
Total	—	—	—	—	1,202	—

Equity incentive conferred to the directors and senior executives of the Company during the reporting period

� Applicable □ Not applicable

— 574 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

Unit: Share

				Exercise				Number of
		Number of	Number of	price of		Number of		restricted
		exercisable	exercised	exercised	Market	restricted	Number of	shares newly		**Number **	of
		shares	shares	shares	price at the	shares held	unlocked	conferred	Price of	restricted
		during the	during the	during the	end of the	at the	shares in the	during the	restricted	shares held
		reporting	reporting	reporting	reporting	beginning of	current	reporting	shares	**at the end **	of
Name	Post	period	period	period	period	the period	period	period	conferred	the period
				(RMB/share)	(RMB/share)				(RMB/share)
Gao Fei	Deputy general	1,048,344	1,048,344	3.584	35.80	0	0	0	0		0
	manager
Wu Yazhou	Deputy general	714,780	714,780	3.584	35.80	0	0	0	0		0
	manager
Jiang Xiaolin	Deputy general	145,200	145,200	5.511	35.80	0	0	0	0		0
	manager
Tan Shu	Deputy general	90,640	90,640	5.511	35.80	0	0	0	0		0
	manager
Jin Jie	Deputy general	833,910	833,910	3.584	35.80	0	0	0	0		0
	manager
Yang Lijie	Chief financial	1,048,344	1,048,344	3.584	35.80	0	0	0	0		0
	officer
Zhao Kai	Board secretary	119,130	119,130	3.584	35.80	0	0	0	0		0
Zhao Kai	Board secretary	22,000	22,000	5.511	35.80	0	0	0	0		0
Zhao Kai	Board secretary	13,200	13,200	19.157	35.80	0	0	0	0		0
Total	—	4,035,548	4,035,548	—	—	0	0	0	—		0
Remarks (if any)	During the reporting period, directors		and senior executives exercised 4,035,548 shares, 75% of which were locked shares held by senior executives and the
	rest were tradable shares without sale		limitations.

— 575 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

V. Employees of the Company

1. Number of employees, professional composition and education level

Number of in-service employees	of the parent company (person)	2,352
Number of in-service employees	of major subsidiaries (person)	3,037
Total number of in-service employees (person)		5,389
Total number of employees receiving remuneration in the current period
(person)		6,348
Number of paid retired employees in the parent company and major
subsidiaries (person)		2
	Professional composition
Category		Number (person)
Technical personnel		3,608
Managerial personnel		594
Sales personnel		373
Operational personnel		814
Total		5,389
	Education level
Category		Number (person)
Master’s degree and above		857
Bachelor’s degree		4,105
Junior college education		394
Technical secondary school education, high school education and below		33
Total		5,389

2. Remuneration policy

The Company’s remuneration and welfare policies are deliberated and approved by the Remuneration and Evaluation Committee under the Board of Directors and serve to evaluate the Company’s development strategies, operating plans, human resources supply & demand, etc. in a comprehensive manner following the principle of giving priority to efficiency with due consideration to fairness and fully maintain the interests of the Company and employees as both guarantor and motivator. The Company’s remuneration policies comply with national and local laws and regulations and safeguard employees’ legal rights and interests; the Company works out fair but differential remuneration policies based on the post valuation result and pays salaries and performance bonuses to employees according to their posts and skill levels; the Company’s salary standards are adjusted on a regular basis according to the social and economic development level, corporate economic benefit and external labour market situation; performance bonuses are distributed according to personal performance evaluation result, and the result is examined layer by layer to ensure its fairness, scientificalness and effectiveness; the Company launches the employee stock ownership plan for senior executives, middle executives and core technical (business) personnel to stimulate employees’ initiative and creativity with an effective incentive and restriction mechanism and maximize the interests of the Company and employees.

— 576 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

3. Training programs

To set up an ecological learning organization, the Company’s training programs focus on cultivating trans-boundary talents and help employees learn about and trust each other and grow rapidly to achieve eco-chemical reaction effect and promote innovation through diverse content and innovative learning mechanism. Capitalizing on the Company’s strong technology platform, employees not only receive field training but also enrich their knowledge through the online “Letv Classroom” at any time. Efforts are also made to build up the ecological synergy. The Company’s training programs in 2016 are as follows:

Orientation Project Result Ecology-oriented Senior Executives and Based on leadership • globalization leadership VP Training • eco-business, help managers transform from business-oriented leaders to TOP 100 Program management-oriented leaders, with a focus on improving the team management Decisive Middle management efficiency and the leadership development.

Decisive Middle management Project Management Empowerment Program New Manager Training Reserve Director Talent Training

The Company conducted seven centralized trainings for senior executives, eight centralized trainings for middle executives and nearly 40 team management trainings, involving almost 2,000 managers, and Lemeng-Knowledge Base and Letv Classroom provided synchronized online courses.

Ecology-oriented Technical College Share Letv ecological knowledge, broaden professionalism employees’ ecological perspective, and O2O College promote trans-departmental business exchange. Enhance professional skills Project Management College training, and intensively develop innovative skills. 414/919 Interpretation Product Manager Course The Company conducted 516 online, offline and departmental trainings, and Marketing Course Lemeng-Knowledge Base and Letv Classroom provided synchronized online Intellectual Property Right courses. UI Series

— 577 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Orientation

Project

Result

• Ecology-oriented New Employee Training general force Letv Classroom Super Classroom

8590 Letv Ecological Training Camp

Department-customized Training Online Learning — Le Classroom

Inspire young employees to develop into innovative talents, and help new employees learn about ecology and integrate into ecology quickly and efficiently. Fully leverage employee’s fragmented time, and promote interaction with ecological content.

The Company conducted 12 management training and tutor sharing courses, 10 group creativity meetings, and 57 new employee trainings, involving nearly 4,000 persons. Le Classroom provided 118 online learning courses for 10,721 effectively active users, with a daily active population of over 200.

4. Labor outsourcing

• Applicable � Not applicable

— 578 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

• D. MANAGEMENT DISCUSSION AND ANALYSIS OF THE RESULTS OF LESHI INTERNET FOR THE FIRST QUARTER ENDED 31 MARCH 2017

Section III Significant Events

• I. Significant change in key financial data and financial indicators and the reasons for the change during the reporting period

• Applicable □ Not applicable

• (1) Significant changes in consolidated balance sheet items and the reasons

	Balance at	Change
	the end of	compared
	the period	with the
	(RMB10	beginning of
Items	thousand)	**the period **	Reasons for change
Notes receivable	20,287.39	3,347.46%	Mainly due to increased receipt of
			bill of acceptance
Inventories	136,883.75	44.82%	Mainly due to stocks for 4•14
			Eco-eCommerce Festival
Notes payable	12,500.00	-44.91%	Mainly due to settlement of expired
			acceptance with drafts
Remuneration payable to	1,638.36	70.49%	Mainly due to the fact that part of
employees			the performance bonus provided has
			not been released
Interests payable	11,264.34	37.58%	Mainly due to provision for interest
			of corporate bonds
Other payables	94,543.68	800.16%	Mainly due to failure to complete
			change in industrial and commercial
			registration for the receipt of
			investment amount
Financial assets sold for	26,492.7	-34.69%	Mainly due to decrease in financial
repurchase			assets held under resale agreements
			of our subsidiary 重慶小貸
Other non-current liabilities	335,527.74	-40.25%	Mainly due to the fact that
			increased capitals from Leran
			Investment Management Partnership
			(limited partnership) in Hangzhou
			Bay New Zone, Ningbo has
			transferred into owner’s equity
Capital reserve	945,554.35	52.58%	Mainly due to transfer of shares of
			the subsidiary Leshi Zhixin at a
			premium

— 579 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

(2) Significant changes in consolidated income statement from January to March and the reasons

	Amount
	incurred in	Change
	the current	compared
	period	with same
	(RMB10	period
Items	thousand)	**last year **	Reasons for change
Taxes and surcharges	1,541.75	28.33%	Mainly due to increase in business
			tax as a result of expansion of
			business scale
Sales expenses	83,004.78	114.65%	Mainly due to increase in
			employees, staff salaries, office and
			conference fees with the business
			development of the Company, and
			to increase in logistics and
			after-sales costs with the
			development of sales of intelligent
			terminal business.
Administrative	14,801.09	27.10%	Mainly due to increase in
expenses			employees, wages and benefits as
			well as amortization with increased
			business scale
Financial expenses	12,381.12	41.64%	Mainly due to provision for interest
			of corporate bonds
Investment revenue	1,409.36	67,790,518.13%	Mainly due to recognition of
			investment incomes of TCL
Non-operating revenue	2,382.48	23,038.98%	Mainly due to increased receipt of
			government subsidies received as
			compared with the previous period
Non-operating expense	78.33	474.68%	Mainly due to disposal of
			non-current assets
Income tax expense	26,253.50	499.60%	Mainly due to increase in income
			tax expense recognized as result of
			transfer of shares of subsidiary of
			the Company

— 580 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

(3) Significant changes in consolidated cashflow statement from January to March and the reasons

Amount incurred in Change the current compared period with same (RMB10 period Items thousand) last year Reasons for change Taxes paid 6,617.83 -37.88% Mainly due to decrease in taxes paid Other cash paid relating to 59,096.12 121.81% Mainly due to increase in related operating activities costs paid with the expansion of business scale

II. Business Review and Outlook

Specific factors driving the change in business income during the reporting period

In the first quarter of 2017, operating condition of the Company was relatively stable. Centering around the annual business plan in 2017, the Company orderly commenced operation by using various advantages to improve the Company’s industrial chain and increase the effort of market expansion, with all business showing a steady development momentum. In the first quarter, the Company realized operating income of RMB4,922,418,200, representing an increase of 6.21% over the same period last year.

In the first two months of 2017, the Company’s performance slowed down due to tight liquidity of companies of related parties. With the introduction of Sunac China, the strategic investors as well as our second largest shareholder, especially when our capital was gradually in place, starting from March operations and performance of the Company has been fully started to pick up, and all business lines have resumed steady growth after a certain period of strategy and product upgrades. Entering the second quarter, coupled with the successful organization of the “4•14 Eco-eCommerce Festival”, revenue growth of the Company is expected to resume in second quarter as compared with the same period last year.

During the reporting period, thanks to high-quality contents and hot sales of end products, the Company had a stable user scale. Daily average UV of all our websites was about 75 million with the peak reaching 100 million; average daily VV was about 390 million with the peak reaching 480 million. Currently the Company has owned 750 CDN nodes and 30Tbps bandwidth reserve all across the world.

— 581 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

During the reporting period, the cost structure of our main business was as follows:

Unit: RMB10 thousand

		Proportion		Year-on-year
		in operating		Increase and
Items	Q12017	costs	Q12016	decrease
Operating costs	358,124.91	100.00%	390,909.44	-8.39%
cdn and bandwidth fees	18,313.63	5.11%	14,767.12	24.02%
Salary and welfare	14,162.64	3.95%	10,659.19	32.87%
Transportation and communication
expenses	384.70	0.11%	602.80	-36.18%
Amortization cost	57,079.67	15.94%	46,510.26	22.72%
Business entertainment	305.05	0.09%	257.34	18.54%
Office allowance	46.48	0.01%	447.09	-89.60%
Others	1,940.17	0.54%	2,508.02	-22.64%
Advertising costs	5,929.62	1.66%	8,254.65	-28.17%
Terminal cost	255,951.76	71.47%	298,002.93	-14.11%
TV play and derivatives	—	0.00%	2,714.19	-100.00%
Other operating costs	4,011.19	1.12%	6,185.87	-35.16%

Material orders signed and the progress

□ Applicable � Not applicable

Orders of scattered numbers

□ Applicable � Not applicable

Significant changes in or adjustments to the products or services of the Company during the reporting period

□ Applicable � Not applicable

— 582 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Progress and impact of important R & D projects

� Applicable □ Not applicable

No. Projects

Progress

Proposed objectives to be reached

Expected influence on the company’s future development

• 1 Basic platform Under ongoing To construct Leshi’s own advertising construction development platform to complete realization of eco-advertising resources; to construct Leshi’s recommended system to provide technical support for the company’s products and services; to set up a cloud video platform and explain the technical barriers for customers to solve building of video platform, and further verify the reliability of cloud platform services from the application point of view, so as to achieve cloud platform support of all Leshi’s business lines; to integrate the company’s transmission platform to reduce repeated development of the module for various terminals.

• 2 Terminal product Under ongoing To improve service performance upgrades and new development relying on the Company’s strong product operation advantages, to facilitate development users to search contents and improve content operations; to conduct R&D and upgrade of new products.

• 3 CDN Projects Under ongoing To develop new functions on the basis development of existing CDNs: to develop scheduling systems for improving server adaptation to media formats, to improve the efficiency and stability of CDN servers’ reporting to logs, and to develop CDN data analysis platforms etc. to meet the Company’s increasing requirements and better serve application of all terminals.

To further enhance ability for realization of advertising revenue; to strengthen own APP recommended ability to cope with big data analysis to enhance user experience; to form a customer base through a self-service cloud video platform to provide the customer base for future content aggregation, distribution and derivative services; to reduce computing resources, storage resources and bandwidth resources; to significantly reduce bandwidth expenses, and to ensure stable transmission of data under various network conditions so as to enhance user experience.

To occupy market share and strengthen user viscosity to make it a high-quality content operating platform; to replace old model products in line with market development, so as to strengthen product competitiveness and enhance user experience.

To enhance the stability of network operations and improve network resource utilization, and at the meantime to strengthen the data collection and analysis capabilities. CDN will the basis for ensuring future distribution of the entire contents of the Leshi ecology to the world.

— 583 —

APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

No. Projects

Progress

Proposed objectives to be reached

Expected influence on the company’s future development

4 Other Under ongoing To achieve centralized management of To reduce operating costs and error business-related development members, merchandise and orders for rate, increase revenue and renewal systems better sales of any combination of rates, integrate the virtual goods development goods and tracing of orders; to carry reporting platform and user behavior out expansion and optimization from trajectory for favorable support to the cost reduction, availability, ease of company decision-making; to enhance use, service security, broadcast delay user experience so as to realize user and other angles, so as to better viscosity, retain old users and develop service the business and to undertake new users for the purpose of reducing external business. operating costs, while externally to commence business operations.

Impact of significant changes in the Company’s intangible assets, core competencies, core technical team or key technical personnel (excluding directors, supervisors and senior management) and so on during the reporting period and the countermeasures

• Applicable � Not applicable

Changes in top five suppliers during the reporting period and the impact

• Applicable □ Not applicable

Normal changes in the top five suppliers of the company with the business development and contract execution of the Company will not have significant impacts on the future operation of the Company, and the Company does not exist reliance on a single supplier

Change in the top five customers of the Company during the reporting period and the impact

• Applicable □ Not applicable

Normal changes in the top five customers of the Company with the business development and contract execution of the Company will not have significant impacts on the future operation of the Company, and the Company does not exist reliance on a single customer

Implementation of annual business plan during the reporting period

• Applicable □ Not applicable

During the reporting period, with focus on the annual development plan, the Company continued to enrich various products, reinforce the Leshi ecology, actively enhance brand awareness to increase brand influence, and continued to change people’s lifestyle of using the Internet, striving to create the living circle of quality fans of Leshi.

— 584 —

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

The operating condition of the Company in the first quarter of 2017 was relatively stable, and the company considers that the results performance of the first quarter will not have a significant impact on the Company’s annual performance in 2017.

Important risk factors that will have adverse impact on the future operation of the Company, major difficulties exist in the operation of the Company and proposed counter measures of the Company

• Applicable □ Not applicable

Please refer to the section “II. Significant risk warning” in “Section II Basic Information of the Company” of this report

III. Analysis on the progress of significant events and their impact and solution

• Applicable □ Not applicable

1. Introduction of strategic investor Sunac China

On 13 January 2017, the Company disclosed a series of announcements including the “Announcement on Significant Events of the Company and Introduction of Strategic Investors (關於 公司重大事項暨引入戰略投資者的公告)”. To meet the capital requirement for future development and promote the strategic upgrade of the Leshi ecology, the Company and Mr. Ji Yaoting, the controlling shareholder and de facto controller of the Company, introduced the strategic investor Tianjin Jiarui Huixin Enterprise Management Co., Ltd. (Sunac China). The transaction was divided into three parts: 1) Mr. Ji Yaoting transfer shares of Leshi Internet (involving an amount of RMB6.041 billion); 2) Leshi Zhixin Electronic Technology (Tianjin) Limited introduced strategic investors (through the transfer of old shares and increase in capital, involving an amount of RMB7.95 billion); 3) LeTV Holdings (Beijing) Co., Ltd., transferred the equities of Le Vision Pictures (involving an amount of RMB1.05 billion). In addition, during the progress of this transaction, Leshi Zhixin Electronic Technology (Tianjin) Limited carries out equity financing of RMB1.83 billion from other investors.

On 30 March 2017, the Company published the “Announcement on Progress of Significant Event” in which it was disclosed that the Company has received the “Confirmation of Securities Transfer Registration” from the China Securities Depository and Clearing Co., Ltd. Shenzhen Branch in the effect that the procedure for transfer registration of 170,711,107 shares of Leshi Internet that Mr. Ji Yaoting has agreed to transfer at a price of RMB35.39 per share have been completed and the shares have transferred under the name of Jiarui Huixin, while other parts of the transaction were under normal progress.

For details please refer to the corresponding announcement on http://www.cninfo.com.cn.

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MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

APPENDIX III

2. Major asset restructuring - injection of Le Vision Pictures

On 6 May 2016, Leshi Internet held the 18th meeting of the 3rd session of Board of Directors and deliberated and approved the Proposal on Scheme regarding Asset Purchase and Fund Raising by Issuance of Shares and Payment with Cash and Connected Transactions (關於本次發行股份及支付現 金購買資產並募集配套資金暨關聯交易的方案的議案) and other proposals relating to the major asset restructuring, and released Documents such as the Plan on Related Transaction of Asset Purchase and Fund Raising by Issuance of Shares and Payment of Cash by 樂視網信息技術（北京）股份有限公司 (樂視網信息技術（北京）股份有限公司發行股份及支付現金購買資產並募集配套資金暨關聯交易預 案) disclosed on http://www.cninfo.com.cn for GEM disclosure as specified by the CSRC.

On 8 November 2016, the Company held the 32nd meeting of the 3rd session of Board of Directors and deliberated and approved the Proposal on Continued Promotion of Major Asset Restructuring Projects. The Company was approved to continue to promote the major asset restructuring, and the Company released the Announcement of 樂視網信息技術（北京）股份有限公司 on Continued Promotion of Major Asset Restructuring and Explanation on Subsequent Work Arrangement (樂視網信息技術（北京）股份有限公司關於繼續推進重大資產重組事項及後續工作安排 說明的公告) disclosed on http://www.cninfo.com.cn, pursuant to which the Company and the counter-parties of the major asset restructuring transaction will continue to promote the major asset restructuring and select 2017, 2018 and 2019 as the three years for results undertaking period of Le Vision Pictures.

As the Company expected that convening a board meeting to consider the major asset restructuring and the announcement of a new restructuring plan will constitute a major adjustment to the original plan, the Company will use date for announcement of the resolution as the record date for pricing for the shares issued. To ensure fair information disclosure, safeguard the interests of investors, and avoid abnormal fluctuations of share price of the Company, upon application to the Shenzhen Stock Exchange, trading of shares of the Company (abbreviated name of Stock: 樂視網; Stock Code: 300104) was suspended since 17 April 2017.

For details please refer to the corresponding announcement disclosed on http://www.cninfo.com.cn.

3. Horizontal competition from Leyang

On 1 March 2017, the Company received from Mr. Jia Yueting, the de facto controller and controlling shareholder, and his spouse Mr. Gan Wei the “ Explanation and Undertaking of Horizontal Competition” the main contents of which was the undertaking that they will put forward a reasonable solution to the problem of horizontal competition in the next one month under the premise of prior protection of interests of shareholders of the listed company.

On 30 March 2017, the Company disclosed the Announcement on Solution to Involvement in Horizontal Competition from the Controlling Shareholder and His Spouse (關於公司控股股東及配偶 涉及同業競爭事宜解決方案的公告). To solve the competition in respect of Mr. Jia Yueting, and Ms. Gan Wei, the controlling shareholder of the Company and his spouse, after negotiation with Ms. Gan, the listed company intended to acquire the 47.8261% equity interests of Beijing Leyang Entertainment

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APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Co., Ltd. (hereinafter referred to as “Leyang Entertainment”) held by Ms. Gan Wei. Upon completion of the implementation, Ms. Gan Wei will no longer hold equity interests of Leyang Entertainment. The valuation of the 100% equity interests of Leyang Entertainment is underway, and the Company together with Mr. Jia Yueting, and Ms. Gan Wei will actively pull forward this work so as to confirm the assessment results as soon as possible. Subsequent progress of the solution will be disclosed in a timely manner based on the assessment result in accordance with the provisions of regulations such as the “GEM Listing Rules of the Shenzhen Stock Exchange “ after consideration the listed company.

For details please refer to the related announce disclosed by the Company on http://www.cninfo.com.cn.

		Index for website disclosing interim
Summary of significant events	Date of Disclosure	reports
Introduction of strategic investor	13 January 2017	Announcement on Significant Events of
Sunac China		the Company and Introduction of
		Strategic Investors (關於公司重大事項暨
		引入戰略投資者的公告) disclosed on
		http://www.cninfo.com.cn
	8 March 2017	Announcement on Progress of Significant
		Events (重大事項進展公告) disclosed on
		http://www.cninfo.com.cn
	30 March 2017	Notice on Completion of Registration of
		Transfer for Transfer of Part of the
		Shares Agreed by Controlling
		Shareholder (關於控股股東協議轉讓部分
		公司股票完成過戶登記的公告) and
		Notice on Progress of Significant Event
		(重大事項進展公告) disclosed on
		http://www.cninfo.com.cn
Major Asset Restructuring —	9 May 2016	Plan on Related Transaction of Asset
Injection by Le Vision Picture		Purchase and Fund Raising by Issuance
		of Shares and Payment of Cash by 樂視
		網信息技術（北京）股份有限公司(樂視網
		信息技術（北京）股份有限公司發行股份及
		支付現金購買資產並募集配套資金暨關聯
		交易預案) disclosed on
		http://www.cninfo.com.cn
	8 November 2016	Announcement of 樂視網信息技術
		（北京）股份有限公司on Continued
		Promotion of Major Asset Restructuring
		and Explanation on Subsequent Work
		Arrangement (樂視網信息技術（北京）股
		份有限公司關於繼續推進重大資產重組事
		項及後續工作安排說明的公告) disclosed
		on http://www.cninfo.com.cn

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APPENDIX III

MANAGEMENT DISCUSSION AND ANALYSIS OF LESHI INTERNET

Summary of significant events

Index for website disclosing interim Date of Disclosure reports

Solution to involvement in 1 March 2017 Annoucement on Receipt of Explanation horizontal competition from and Undertaking of Horizontal Leyang Competition from Controlling shareholder and his Spouse (關於收到公司控股股東及 配偶同業競爭說明與承諾的公告) disclosed on http://www.cninfo.com.cn 30 March 2017 Announcement on Solution to Involvement in Horizontal Competition from Controlling shareholder and his Spouse (關於公司控股股東及配偶涉及同 業競爭事宜解決方案的公告) disclosed on http://www.cninfo.com.cn

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FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

A. AUDITED CONSOLIDATED FINANCIAL STATEMENTS OF LESHI PICTURES FOR THE YEAR ENDED 31 DECEMBER 2016

The following are the text of the audit report issued by the auditor of Leshi Pictures, Beijing Puhongde CPA Co., Ltd. (general partnership) and the audited consolidated financial statements of Leshi Pictures for the year ended 31 December 2016, which were prepared in accordance with the CAS. These audit report and audited consolidated financial statements are not prepared for incorporation into this circular, and are included in this circular for information purposes only. These audit report and financial statements were issued in Chinese and the English translated version is provided for information purposes only. In case of discrepancies between the two versions, the Chinese version shall prevail.

The Directors wish to emphasize that the extracts reproduced below are not prepared for incorporation into this circular and the Group has not participated in their preparation. As such, the Directors do not express any view as to their truth, accuracy or completeness, and the Shareholders and investors should exercise caution and should not place undue reliance on such information.

Audit Report

Pu Shen Zi [2017] No. I-0022

All shareholders of Le Vision Pictures (Beijing) Co., Ltd.,

We have audited the attached consolidated financial statements of Le Vision Pictures (Beijing) Co., Ltd. (hereinafter referred to as the “Company”), including the consolidated balance sheets as at 31 December 2016, the consolidated profit statements, consolidated cash flow statements of 2016 and notes to the consolidated financial statements.

I. Responsibility of the management for the financial statements

The management of Le Vision Pictures (Beijing) Co., Ltd. is responsible for preparing financial statements in accordance with the Accounting Standards for Business Enterprises and the Enterprise Accounting System. These responsibilities include: (1) designing, implementing and maintaining relevant internal control to avoid material misstatement in these financial statements resulting from fraudulence or mistakes; (2) selecting and applying appropriate accounting policies; and (3) making reasonable accounting estimates.

II. Responsibility of certified public accountant

Our responsibility is to express an opinion on these financial statements based on our audit. We have performed the audit in accordance with the Chinese CPA Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance whether the financial statements are free of material misstatement.

Auditing involves the implementation of audit procedure to obtain the related financial statement amount and disclose audit evidence. The selection of audit procedure depends on judgment of the

— 589 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

certified public accountant (CPA), including the risk assessment of material misstatement of financial statements due to fraud or error. In making those risk assessments, we consider internal control relevant to the entity’s preparation of financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our qualified opinion.

III. Audit Opinion

In our opinion, the financial statements of the Company were prepared in accordance with the Accounting Standards for Business Enterprises and the Enterprise Accounting System, giving a fair view of the financial position of the Company as of 31 December 2016, and of its financial performance and cash flows for the year then ended in all material respects.

Beijing Puhongde CPA Co., Ltd. Certified Public Accountant of China: (general partnership) (senior accountant):

Certified Public Accountant of China:

4 May 2017

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FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

Consolidated balance sheet

Prepared by: Le Vision Pictures (Beijing) Co., Ltd.

31 December 2016

Unit: RMB

Assets Column No. Current assets: Monetary funds 1 Financial assets held for trading 2 Notes receivable 3 Accounts receivable 4 Advance payment 5 Interest receivable 6 Dividend receivable 7 Other receivables 8 Inventory 9 Non-current assets maturing within one year 10 Other current assets 11 Total current assets 12 Non-current assets: Financial assets available for sale 13 Held-to-maturity investments 14 Long-term accounts receivables 14 Long-term equity investments 15 Investment real estate 15 Fixed assets 16 Construction in process 16 Project materials 17 Disposal of fixed assets 17 Productive biological assets 18 Oil and gas assets 18 Intangible assets 19 Development expenses 19 Goodwill 20 Long-term unamortized expenses 20 Deferred income tax assets 21 Other non-current assets 22 Subtotal for non- current assets 23 Total assets 24	Closing Balance Opening Balance 193,192,144.31 1,397,530,024.19 415,602,755.30 692,108,443.62 194,739,782.74 318,228,189.35 2,086,671.23 930,471.48 1,852,390,268.78 73,414,377.00 510,862,951.00 232,107,222.75 1,727,886.33 13,627,320.22 3,170,602,759.69 2,727,946,048.61 103,177,366.35 1,983,906.44 1,615,341.01 1,435,344.49 3,397,183.23 3,283,999.71 119,127,953.18 123,361,054.44 227,317,843.77 130,064,305.08 3,397,920,603.46 2,858,010,353.69	Closing Balance Opening Balance 193,192,144.31 1,397,530,024.19 415,602,755.30 692,108,443.62 194,739,782.74 318,228,189.35 2,086,671.23 930,471.48 1,852,390,268.78 73,414,377.00 510,862,951.00 232,107,222.75 1,727,886.33 13,627,320.22 3,170,602,759.69 2,727,946,048.61 103,177,366.35 1,983,906.44 1,615,341.01 1,435,344.49 3,397,183.23 3,283,999.71 119,127,953.18 123,361,054.44 227,317,843.77 130,064,305.08 3,397,920,603.46 2,858,010,353.69
		1,983,906.44 1,435,344.49 3,283,999.71 123,361,054.44 130,064,305.08 2,858,010,353.69

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FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

Liabilities and owner’s equity (or shareholders’ equity)

Column No. Closing Balance Opening Balance

Current liabilities:

Current liabilities:
Short-term loans 25 Financial liabilities held for trading 26 Notes payable 27 Accounts payable 28 Advance receipt 29 Payroll payable 30 Taxes payable 31 Interest payable 32 Dividends payable 33 Other payables 34 Non-current liabilities maturing within one year 35 Other current liabilities 36 Total current liabilities 37 Non-current liabilities: Long-term loans 38 Bonds payable 39 Long-term payable 40 Special accounts payable 41 Accrued liabilities 42 Deferred income tax liabilities 41 Other non-current liabilities 42 Total non-current liabilities 43 Total liabilities 44 Owner’s equity(or shareholder’s equity): Paid-in capital (or share capital) 45 Capital reserves 46 Less: treasury stock 47 Other comprehensive incomes 48 Surplus reserves 49 Undistributed profits 50 Total equity attributable to shareholders of the parent company 51 Minority equity 52 Total owner’s equity (or shareholder’s equity) 53 Total liabilities and owner’s equity (or shareholder’s equity) 54	163,742,000.00 330,892,976.80 239,786,537.05 7,274,501.08 32,124,260.74 5,375,626.19 16,516,157.83 343,165,112.62 1,138,877,172.31 0.00 1,138,877,172.31 836,792,444.00 2,283,565,643.22 -812,075.86 184,738.38 -861,067,962.13 2,258,662,787.61 380,643.54 2,259,043,431.15 3,397,920,603.46	64,415,371.34 313,354,941.51 56,125,645.82 5,068,530.14 5,392,073.53 5,407,944.62 11,310,397.02 19,026,248.00 480,101,151.98 44,367,245.00 297,328,172.43 341,695,417.43
		821,796,569.41
		836,792,444.00 2,205,623,843.22 -175,562.50 184,738.38 -1,006,504,299.38 2,035,921,163.72 292,620.56 2,036,213,784.28
		2,858,010,353.69

— 592 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

Consolidated profit statement

Prepared by: Le Vision Pictures (Beijing) Co., Ltd.	Prepared by: Le Vision Pictures (Beijing) Co., Ltd.	2016	Unit: RMB
			Amount in
Items		Column No.	Current Year
I.	Revenue	1	1,098,268,148.98
Less:	operating costs	2	573,364,855.33
	Business taxes and surcharges	3	1,014,293.66
	Selling expenses	4	204,495,836.12
	Management fees	5	183,949,909.17
	Financial expenses	6	-16,756,562.99
	Asset impairment losses	7	1,615,241.59
Add:	incomes from changes in fair value (loss is indicated by “-”)	8
	Investment incomes (loss is indicated by “-”)	9	-648,940.09
	Including: investment incomes from joint ventures
	and associates	10
II.	Operating profits (deficit is indicated by “-”)	11	149,935,636.01
Add:	Non-operating incomes	12	32,503,525.59
Less:	non-operating expenses	13
	Including: disposal losses from non-current assets	14
III.	Total profits (the total loss expressed with “-”)	15	182,439,161.60
Less:	income tax expenses	16	36,914,801.37
IV.	Net profits (the net loss expressed with “-”)	17	145,524,360.23
Including: net profit attributed to owners of parent company		18	145,436,337.25
	Gains/losses of minority shareholders	19	88,022.98
V.	Earnings per share:	20
	(I) Basic EPS	21
	(II) Diluted EPS	22

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FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

Consolidated cash flow statement

Prepared by: Le Vision Pictures (Beijing) Co., Ltd.	Prepared by: Le Vision Pictures (Beijing) Co., Ltd.	2016	Unit: RMB
Items		Column No.	Amount
I.	Cash flows from operating activities:	1
	Cash received from sales of goods and rendering of
	services	2	1,708,059,754.43
	Tax refunds received	3	30,716,591.04
	Cash received relating to other operating activities	4	392,085,188.26
	Subtotal for cash inflow	5	2,130,861,533.73
	Cash paid for goods or receiving services	6	991,735,594.81
	Cash paid to and on behalf of employees	7	91,475,262.91
	Tax payments	8	27,077,098.40
	Cash paid relating to other operating activities	9	2,168,312,164.12
	Subtotal for cash outflows	10	3,278,600,120.24
	Net cash flows from operating activities	11	-1,147,738,586.51
II.	Cash flows from investment activities:	12
	Cash received from disposal of investments	13
	Cash received from investment income	14
	Net amount of cash resulted from disposal of fixed assets,
	intangible assets and other long term assets	15
	Cash received relating to other investing activities	16
	Subtotal for cash inflow	17	—
	Cash paid to acquire fixed assets, intangible assets and
	other long-term assets	18	445,864.71
	Cash paid for investments	19	101,842,400.00
	Cash paid relating to other investing activities	20	—
	Subtotal for cash outflows	21	102,288,264.71
	Net cash flows from investment activities	22	-102,288,264.71
III.	Cash flows from financing activities	23
	Cash received by investors	24	163,742,000.00
	Cash received from borrowings	25
	Other cash received related to financing activities	26	10,312,899.31
	Subtotal for cash inflows	27	174,054,899.31
	Cash paid for repayments of debts	28	81,130,768.68
	Cash paid for distribution of dividends or profits, or cash
	payments for interests	29	31,477,416.19
	Other cash paid related to financing activities	30	3,000,000.00
	Subtotal for cash outflows	31	115,608,184.87
	Net cash flows from financing activities	32	58,446,714.44
IV.	Effect of exchange rate movement on cash	33	-2,389,359.94
			—
V.	Net increments of cash and cash equivalent	34	1,193,969,496.72
	Add: opening balance of cash and cash equivalents	35	1,337,161,941.03
VI.	Balance of cash and cash equivalent at the end of period	36	143,192,444.31

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FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

NOTES TO THE CONSOLIDATED ACCOUNTING STATEMENTS

As of December 31st, 2016

(In RMB, unless otherwise stated)

I. Company Profile

Le Vision Pictures (Beijing) Co., Ltd. (hereinafter referred to as the “Company”) was established on December 28th, 2011. It was registered with Huairou branch of Beijing Administration for Industry and Commerce, and was issued the business license with an unified social credit code 91110116589133454J. Its registered capital is RMB836,792,444.

Legal representative: Zhang Zhao.

The subscribed amount of registered capital and the proportion of capital contribution made by each of the shareholders are as below:

		Unit: RMB
	Subscribed	Proportion
	amount of	of capital
	registered capital	contribution
Investors	(0’000)	(%)
LeTV Holdings (Beijing) Co., Ltd. (樂視控股（北京）
有限公司)	36,303.11	43.3837%
Le’an Yingyun (Tianjin) Culture Communication
Partnership (Limited Partnership) (樂安影雲（天津）文
化傳播合夥企業（有限合夥）)	6,460.55	7.7206%
Shanghai Chunhua Jingli Investment Center (Limited
Partnership) (上海春華景立投資中心（有限合夥）)	3,599.11	4.3011%
Zhang Zhao (張昭)	3,204.16	3.8291%
Shenzhen LeTV Xingenyihao Investment Management
Enterprise (Limited Partnership)
(深圳市樂視鑫根壹號投資管理企業（有限合夥）)	2,999.26	3.5842%
Beijing Yinye Jinhong Investment Partnership (Limited
Partnership) (北京銀葉金宏投資合夥企業（有限合夥）)	2,856.97	3.4142%
Lepu Yingtian (Tianjin) Culture Communication
Partnership (Limited Partnership) (樂普影天
（天津）文化傳播合夥企業（有限合夥）)	2,849.04	3.4047%
Beijing Siwei Equity Investment Management Center
(Limited Partnership) (北京思偉股權投資管理中心
（有限合夥）)	2,399.40	2.8674%
Ma Xuefeng (馬雪峰)	2,048.89	2.4485%
Liu Hong (劉弘)	1,512.61	1.8076%

— 595 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

	Subscribed	Proportion
	amount of	of capital
	registered capital	contribution
Investors	(0’000)	(%)
LeTV Rongtong (Tianjin) Cultural Communication
Partnership (Limited Partnership) (樂視榮通
（天津）文化傳播合夥企業（有限合夥）)	1,438.19	1.7187%
Li Li (李力)	1,422.67	1.7001%
Beijing Jinyang Asset Management Center (Limited
Partnership) (北京錦陽資產管理中心（有限合夥）)	1,379.66	1.6488%
Shenzhen Weigang Lingyi Investment Co., Ltd.
(深圳市維港零壹投資有限公司)	1,285.66	1.5364%
Yongtai Xinfeng Investment Co., Ltd.
(永泰鑫豐投資有限公司)	1,285.66	1.5364%
Zhang Yimou (張藝謀)	1,201.53	1.4359%
Sichuan Hongyi Industrial Group Co., Ltd.
(四川宏義實業集團有限公司)	1,124.92	1.3443%
Shanghai Jinglinjingqi Investment Center (Limited
Partnership) (上海景林景麒投資中心（有限合夥）)	1,011.36	1.2086%
Shenzhen Innovation Investment Group Co., Ltd.
(深圳市創新投資集團有限公司)	878.8875	1.0503%
Xue Mei (薛梅)	703.083	0.8402%
Shenzhen Hongtu Information Venture Capital Co., Ltd.
(深圳市紅土信息創業投資有限公司)	703.0064	0.8401%
Shanghai Jinglinjingtu Investment Center (Limited
Partnership) (上海景林景途投資中心（有限合夥）)	691.33	0.8262%
Beijing LeTV Xingyun Investment Center (Limited
Partnership) (北京樂視星雲投資中心（有限合夥）)	527.295	0.6301%
Beijing Rongxinhang Fund Management Center (Limited
Partnership) (北京融信行基金管理中心（有限合夥）)	527.295	0.6301%
Shijiazhuang Hongtujishen Venture Capital Co., Ltd.
(石家莊紅土冀深創業投資有限公司)	527.2883	0.6301%
Hebei Hongtu Venture Capital Co., Ltd.
(河北紅土創業投資有限公司)	527.2166	0.6300%
Guo Jingming (郭敬明)	500	0.5975%
Shanghai Xishida Electronic Technology Co., Ltd.
(上海喜仕達電子技術有限公司)	428.5761	0.5122%
Shanghai Huixinghuiying Screen Culture Studio
(上海慧形慧影影視文化工作室)	359.9107	0.4301%
Li Weiran (李蔚然)	344.8655	0.4121%
Zhao Yue (趙越)	321.4321	0.3841%
Liu Youliang (劉優良)	321.4321	0.3841%
Ji Xiaoqing (吉曉慶)	312.5149	0.3735%

— 596 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

	Subscribed	Proportion
	amount of	of capital
	registered capital	contribution
Investors	(0’000)	(%)
Hengtai Capital Investment Co., Ltd.
(恒泰資本投資有限責任公司)	285.6943	0.3414%
Diao Lili (刁麗莉)	281.2469	0.3361%
Sun Honglei (孫紅雷)	239.9405	0.2867%
Shanghai Sun Li Screen Culture Studio
(上海孫儷影視文化工作室)	239.9405	0.2867%
Shanxi Xierun Investment Co., Ltd.
(山西協潤投資有限公司)	142.8817	0.1708%
Yu Zhong (于忠)	128.5728	0.1537%
Wu Lin (吳林)	119.9702	0.1434%
Feng Wei (馮威)	119.9702	0.1434%
Taoyun (Beijing) Film & Television Investment
Management Co., Ltd. (韜蘊（北京）影視投資管理
有限公司)	119.9702	0.1434%
Huang Xiaoming (黃曉明)	59.9851	0.0717%
Li Xiaolu (李小璐)	59.9851	0.0717%
Total	83,679.2444	100.00%

The registered address of the Company is: Unit 1002, Block A, No. 9 Fengxiang Street, Yangsong town, Huairou district, Beijing

The Company’s main business scope includes: production and release of cartoons, feature films and television variety; not allowed to produce political news and similar topics, columns and other radio and television programs; film distribution; investment management; asset management; lease of film and television equipment; film and television planning; training on film and television production technology; organization of cultural and artistic exchange activities (excluding performances); design, production, agent and releasing of advertisements; conference services; economic information consultation; market survey; technique extension services; technology development of film and television derivatives; sales of apparel, cultural goods and daily necessities; cultural brokers and personal performance brokers; ticketing agents (excluding air ticket sales agents).

II. Major Accounting Policies

1. Accounting system:

The Company implements the Accounting Standards for Business Enterprises and its supplementary provisions.

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APPENDIX IV

2. Fiscal period:

The fiscal year of the Company begins on January 1 and ends on December 31 of the Gregorian calendar.

3. Accounting principles and valuation basis:

The accounting of the Company adopts the accrual-basis principle and the debit-credit bookkeeping method, and the asset valuation is based on historical cost.

4. Translation between the recording currency and foreign currencies

The recording currency of the Company is RMB.

In the case of economic transactions involving any foreign currency, such foreign currency transactions are accounted for in the recording currency translated at the market exchange rates at the beginning of the month, and the exchange gains and losses arising from the adjustment to exchange rates at the end of each year are charged to the financial expenses.

1. Accounting treatment of business combinations under common control and under non-common control

2. (1) Business combination under common control

Where the enterprises involved in the combination are ultimately controlled by the same party or the same parties before and after the combination and such control is not temporary, it is a business combination under common control. The assets and liabilities acquired by the acquirer in the business combination are measured at the carrying amount of the acquiree on the combination date. The difference between carrying amounts of the net assets acquired and the combination consideration paid (or total value of the issued shares) by the acquirer is adjusted to the capital reserve; if the capital reserve is insufficient to offset, the retained earnings shall be adjusted.

(2) Business combination under non-common control

Business combination under non-common control refers to a combination where the parties involved in the combination are not ultimately controlled by the same party or the same parties before and after the combination. The combination costs of the acquirer are the fair value of assets paid, liabilities incurred or undertaken and equity bonds issued by the acquirer on the acquisition date in order to obtain control over the acquiree.

Where the combination cost is higher than the fair value of identifiable net assets aquired from the acquiree in a business combination, the acquirer shall recognize such difference as goodwill. Where the combination cost is less than the fair value of identifiable net assets acquired from the acquiree in a business combination, the acquirer shall recognize such difference in the profit or loss for the period.

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APPENDIX IV

The assets paid, liabilities incurred or undertaken by the acquirer on the acquisition date for the consideration of the business combination shall be measured at the fair value, and the difference between the fair value and the carrying amount shall be included in the profit and loss for the period.

Preparation method of consolidated financial statements:

The consolidated financial statements are prepared in accordance with the “Accounting Standards for Business Enterprises No. 33 - Consolidated Financial Statements” issued in February 2006. All subsidiaries and special purpose entities controlled by the Company are included in the consolidation scope of the consolidated financial statements. From the date of obtaining actual control over a subsidiary, the Company begins to consolidate it and ceases to consolidate it from the date of loss of actual control. The consolidated financial statements are based on the individual financial statements of the parent company and the subsidiaries included in the consolidation scope, and are prepared by the parent company based on other relevant information after making adjustment to the long-term equity investment in the subsidiaries under the equity method.

All significant intra-group balances, transactions and unrealized profits are offset when the consolidated financial statements are prepared. The part of shareholders’ equity of a subsidiary which is not attributable to the parent company is presented separately as minority interest in the shareholders’ equity in the consolidated financial statements.

If the accounting policies or accounting periods adopted by the subsidiaries are inconsistent with those of the parent company, the financial statements of the subsidiaries shall be adjusted in accordance with the accounting policies or accounting periods of the parent company when preparing the consolidated financial statements.

For subsidiaries acquired upon business combinations under non-common control, in preparing the consolidated balance sheets, the individual financial statements shall be adjusted on the basis of the fair value of the identifiable net assets on the acquisition date; for subsidiaries acquired upon business combinations under common control, in preparing the consolidated balance sheets, the assets, liabilities, operating results and cash flows of such subsidiaries are included in the consolidated financial statements from the beginning of the earliest period during the reporting period, as if the business combinations have occurred at the beginning of the earliest period during the reporting period, and the net profit realized before the combination date is reflected under separate items in the consolidated income statements.

6. Preparation method of consolidated financial statements

(1) Consolidation scope

The consolidation scope of the consolidated financial statements of the Company is determined on the basis of control.

The parent company directly owns or, through its subsidiaries, indirectly owns the majority of the voting rights of the investees and if the parent company has control over the investees, such investees are classified as subsidiaries and included in the scope of consolidation in the consolidated

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FINANCIAL INFORMATION OF LESHI PICTURES

financial statements. If the parent company has 50% or below voting rights of the investees and fulfils one of the following conditions, it is deemed that the parent company has control over the investees. Accordingly, such investees will be classified as subsidiaries and included in the scope of consolidation in the consolidated financial statements:

• A. owns the majority of the voting rights in the investees through the agreement between the investees and other investors;

• B. has the right to decide on the financial and operating policies of the investees in accordance with the articles or other requirements;

• C. has the power to appoint or remove the majority of the members of the board or similar committees of the investees;

• D. has the majority of voting rights in the board or similar committees of the investees.

If there is any evidence that the parent company does not have control over the investees, such investees shall not be included in the scope of consolidation in the financial statements.

(2) Preparation method of consolidated financial statements

The consolidated financial statements of the Company are prepared based on the individual financial statements of the subsidiaries that are within the scope of consolidation. Based on other relevant information, the long-term equity investments in the subsidiaries are adjusted under the equity method to offset the impact of the internal transactions entered into between the parent company and the subsidiaries and among the subsidiaries on the consolidated statements.

(3) Minority interests and presentation of profit or loss

The shareholders’ equity of the subsidiaries is not accounted for as equity of the parent company but as minority interests. In the consolidated balance sheet, the shareholders’ equity is presented under “minority interests”.

The profit or loss of the subsidiaries for the period is accounted for as minority interests and presented under “minority interests” in net profits in the consolidated income statement.

(4) Treatment of excess loss

In the consolidated income statements, if the loss for the period attributable to minority shareholders of a subsidiary exceeds the shareholders’ equity attributable to minority shareholders in such subsidiary at the beginning of the period, the balance shall be offset against the minority interests.

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APPENDIX IV

• (5) Accounting treatment of acquisition and disposal of subsidiaries for the period in consolidated statements

During the reporting period, for subsidiaries acquired upon business combination under common control, in preparing the consolidated balance sheet, the opening balance of the consolidated balance sheet shall be adjusted. For subsidiaries acquired upon business combination under non-common control, in preparing the consolidated balance sheet, the opening balance of the consolidated balance sheet shall not be adjusted. For disposal of subsidiaries during the reporting period, in preparing the consolidated balance sheet, the opening balance of the consolidated balance sheet shall not be adjusted.

During the reporting period, for subsidiaries acquired upon business combination under common control, the income, expenses and profits of such subsidiary from the beginning of the consolidation period to the end of the reporting period shall be included in the consolidated income statement. For subsidiaries acquired upon business combination under non-common control, the income, expenses and profits of such subsidiary from the acquisition date to the end of the reporting period shall be included in the consolidated income statement. For disposal of subsidiaries during the reporting period, the income, expenses and profits of such subsidiary from the beginning of the period to the disposal date shall be included in the consolidated income statement.

During the reporting period, for subsidiaries acquired upon business combination under common control, the cash flow of such subsidiary from the beginning of the consolidation period to the end of the reporting period shall be included in the consolidated cash flow statement. For subsidiaries acquired upon business combination under non-common control, the cash flow of such subsidiary from the acquisition date to the end of the reporting period shall be included in the consolidated cash flow statement. For disposal of subsidiaries during the reporting period, the cash flow of such subsidiary from the beginning of the period to the disposal date shall be included in the consolidated cash flow statement.

1. Accounting method of bad debt

2. 7.1 Recognition principle for bad debt:

The Company will recognize bad debt based on:

• (1) the irrecoverable amount of the debtor who has gone bankrupt or has died and has insufficient asset to repay;

• (2) the irrecoverable amount, demonstrated by sufficient evidence and approved to write off, of a debtor who does not comply with his/her repayment obligation over three years.

• 7.2 The Company adopts the aging analysis method in the allowance method for accounting its bad debts.

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APPENDIX IV

8. Accounting method of inventories

Purchase and storage of raw materials are measured at the cost actually incurred. Low value consumables are fully amortized at one time or amortized by several times when they are issued, depending on different circumstances.

9. Accounting method of long-term investment

The long-term investment of the Company is stated at the actual payment or the determined value at the time of investment, and is accounted for by using equity method.

10. Accounting method of fixed assets

10.1 Criteria for fixed assets:

Fixed assets are house, building, machine, equipment, transport vehicle and other equipment, apparatus and tools related to production and operation, which have useful lives of more than one year, as well as assets that are not major equipment for production and operation purposes, which have useful lives of more than two years.

10.2 Fixed assets measurement:

Fixed assets are measured at their actual costs.

10.3 Fixed assets are depreciated using the straight-line method.

11. Accounting method of construction in progress

The Company’s construction in progress is accounted for project by project and stated at the total expenses actually incurred, and transferred to fixed assets at the date of reaching its intended usable conditions at the full cost of the project. The borrowing costs (such as interest expenses on borrowings, exchange gains and losses and foreign currency translation differences) directly related to the construction of the construction in progress, are capitalized before the project reaches its intended usable condition and included in the project cost. After the project reaches its intended usable condition, the borrowing costs above-mentioned are included in the current profits and losses.

The Company’s construction in progress is measured at the lower of its carrying amount and the recoverable amount at the end of the year. The impairment loss on construction in progress is provided separately based on the difference between the recoverable amount of an individual asset and its carrying value, and included in the current profits and losses.

12. Accounting method of intangible assets

Intangible assets of the Company refer to the long-term non-monetary assets held by the Company for production or supply of goods or services, for rental to others, or for administrative purposes, which have no physical shape. Intangible assets are stated for at the actual cost at the time of acquisition and amortized in 10 years by installments and are recognized in profit or loss in each amortization period.

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APPENDIX IV

13. Recognition of revenue

In addition to satisfying the conditions that the economic benefits in connection with transactions can flow into the Company and that the relevant revenue can be reliably measured, recognition of revenue of the Company shall also satisfy:

• 13.1 Revenue from sales of goods: Revenue from sales of goods is recognized as operating revenue if: the major risk and reward in connection with the ownership of the product has been transferred by the Company to the buyer, the Company no longer has custody and de facto control over the product, related revenue or evidence of entitlement to receivables has been received and the costs related to the sales of such product can be reliably measured.

• 13.2 Revenue from provision of labor services: for labor services which are commenced and completed in the same year, revenue is recognised as operating revenue upon the labor services have been rendered, consideration or evidence of entitlement to the consideration has been received. For labor services which are commenced and completed in different years, the relevant revenue is recognized according to the percentage of completion.

14. Accounting treatment of income tax

The Company calculates its income tax by using taxes payable method. The taxable income, which is the basis for calculating current income tax, is determined after making adjustment to the pre-tax accounting profit for the current year according to relevant tax law provisions.

15. Taxes

The main taxes paid and tax rates applied by the Company are set out below:

Taxes	Tax rates	Notes
VAT		Tax free
VAT	6%/3%	Calculated based on taxable income
Construction fee for cultural undertakings	3%	Calculated based on taxable income
Urban maintenance and construction tax	5%	Calculated as 5% of turnover tax
		payable
Education surcharge	3%	Calculated as 3% of turnover tax
		payable
Local education surcharge	2%	Calculated as 2% of turnover tax
		payable
Enterprise income tax	25%	Accounted for by using taxes
		payable method
Individual income tax		Deducted and paid by the Company
		on behalf of the individual

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FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

• III. Contingencies

As of 31 December 2016, the Company did not have any contingencies to disclose.

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APPENDIX IV

IV. Events Subsequent to Balance Sheet Date:

As of 31 December 2016, the Company did not have any subsequent events to disclose.

V. Related Parties Relationship and Related Party Transactions:

	Type of related
Name of related parties	parties
Leshi Holding (Beijing) Co., Ltd. (樂視控股（北京）有限公司)	Investor
Sichuan Hongyi Industrial Group Co., Ltd. (四川宏義實業集團有限公司)	Investor
Shijiazhuang Hongtujishen Venture Capital Co., Ltd. (石家莊紅土冀深創
業投資有限公司)	Investor
Hebei Hongtu Venture Capital Co., Ltd. (河北紅土創業投資有限公司)	Investor
Shenzhen Innovation Investment Group Co., Ltd. (深圳市創新投資集團有
限公司)	Investor
Beijing LeTV Xingyun Investment Center (Limited Partnership) (北京樂
視星雲投資中心（有限合夥）)	Investor
Shenzhen Hongtu Information Venture Capital Co., Ltd. (深圳市紅土信息
創業投資有限公司)	Investor
Shanghai Jinglinjingqi Investment Center (Limited Partnership) (上海景林
景麒投資中心（有限合夥）)	Investor
Shanghai Jinglinjingtu Investment Center (Limited Partnership) (上海景林
景途投資中心（有限合夥）)	Investor
Lepu Yingtian (Tianjin) Culture Communication Partnership (Limited
Partnership) (樂普影天（天津）文化傳播合夥企業（有限合夥）)	Investor
Lezheng Rongtong (Tianjin) Culture Communication Partnership (Limited
Partnership) (樂正榮通（天津）文化傳播合夥企業（有限合夥）)	Investor
Le’an Yingyun (Tianjin) Culture Communication Partnership (Limited
Partnership) (樂安影雲（天津）文化傳播合夥企業（有限合夥）)	Investor
Shenzhen Weigang Lingyi Investment Co., Ltd.
(深圳市維港零壹投資有限公司)	Investor
Shanghai Xishida Electronic Technology Co., Ltd.
(上海喜仕達電子技術有限公司)	Investor
Hengtai Capital Investment Co., Ltd. (恒泰資本投資有限責任公司)	Investor
Shanxi Xierun Investment Co., Ltd. (山西協潤投資有限公司)	Investor
Beijing Yinye Jinhong Investment Partnership (Limited Partnership)
(北京銀葉金宏投資合夥企業（有限合夥）)	Investor
Shanghai Chunhua Jingli Investment Center (Limited Partnership)
(上海春華景立投資中心（有限合夥）)	Investor
Shenzhen LeTV Xingenyihao Investment Management Enterprise
(Limited Partnership) (深圳市樂視鑫根壹號投資管理企業（有限合夥）)	Investor
Beijing Siwei Equity Investment Management Center (Limited
Partnership) (北京思偉股權投資管理中心（有限合夥）)	Investor

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FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

Name of related parties

Type of related parties

Shanghai Huixinghuiying Screen Culture Studio (上海慧形慧影影視文化工作室) Investor Shanghai Sun Li Screen Culture Studio (上海孫儷影視文化工作室) Investor Taoyun (Beijing) Film & Television Investment Management Co., Ltd. (韜蘊（北京）影視投資管理有限公司) Investor Beijing Jinyang Asset Management Center (Limited Partnership) (北京錦陽資產管理中心（有限合夥）) Investor Beijing Rongxinhang Fund Management Center (Limited Partnership) (北京融信行基金管理中心（有限合夥）) Investor Yongtai Jinfeng Investment Co., Ltd. (永泰金豐投資有限公司) Investor Leying Network Information (Tianjin) Co., Ltd. (樂影網絡信息 （天津）有限公司) Subsidiary Le Vision Pictures (Tianjin) Co., Ltd. (樂視影業（天津）有限公司) Subsidiary Leyi Culture Broker (Beijing) Co., Ltd. (樂藝文化經紀（北京）有限公司) Subsidiary Khorgos Le Vision Pictures Co., Ltd. (霍爾果斯樂視影業有限公司) Subsidiary Le Vision Pictures (HK) Co., Limited Subsidiary Le Vision Pictures (US) Co., Limited (樂視影業（美國）有限公司) Sub-subsidiary

VI. Significant Assets Transfer and Disposal:

The Company did not have any significant asset transfer and disposal to explain in 2016.

VII. Business Combination

1. Particulars of subsidiaries

• (1) Subsidiaries acquired through establishment or investment

					Whether
	Type of	Place of	Registered	Proportion of	statements are
Full name of subsidiary	subsidiary	incorporation	capital (’0,000)	shareholding (%)	combined
Leying Network Information
(Tianjin) Co., Ltd. (樂影網絡
信息（天津）有限公司)	Limited company	Tianjin	RMB100	100%	Yes
Le Vision Pictures (Tianjin) Co.,
Ltd. (樂視影業（天津）
有限公司)	Limited company	Tianjin	RMB1,000	100%	Yes
Leyi Culture Broker (Beijing)
Co., Ltd. (樂藝文化經紀
（北京）有限公司)	Limited company	Beijing	RMB100	70%	Yes

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FINANCIAL INFORMATION OF LESHI PICTURES

					Whether
	Type of	Place of	Registered	Proportion of	statements are
Full name of subsidiary	subsidiary	incorporation	capital (’0,000)	shareholding (%)	combined
Khorgos Le Vision Pictures Co.,
Ltd. (霍爾果斯樂視影業
有限公司)	Limited company	Xinjiang	RMB300	100%	Yes
Le Vision Pictures (HK) Co.,
Limited	Limited company	Hong Kong	USD8,000	100%	Yes

2. Particulars of sub-subsidiaries

• (1) Sub-subsidiaries acquired through establishment or investment

					Whether
	Type of	Place of	Registered	Proportion of	statements are
Full name of sub-subsidiary	sub-subsidiary	incorporation	capital (’0,000)	shareholding (%)	combined
Le Vision Pictures (US) Co.,
Limited (樂視影業（美國）
有限公司)	Limited company	United States	USD50	100%	Yes

VIII. Notes to the Relevant Items of Accounting Statements

(I) Financial positions of the Company as at 31 December 2016:

The Company had total assets, total liabilities, undistributed profits, equity attributable to shareholders of the parent company and minority interests of RMB3,397,920,603.46, RMB1,138,877,172.31, RMB-861,067,962.13, RMB2,258,662,787.61 and RMB380,643.54 respectively.

1. Monetary funds

Item Opening balance Ending balance Monetary funds 1,397,530,024.19 193,192,444.31 Total 1,397,530,024.19 193,192,444.31 Accounts receivable Opening balance Ending balance Accounts receivable 692,108,443.62 415,602,755.30 Total 692,108,443.62 415,602,755.30

1. Accounts receivable

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FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

• B. Information about major debtors:

Major debtors	Ending balance
HuaXia Film Distribution Co., Ltd. (華夏電影發行有限責任公司)	181,074,339.48
Khorgos Leshi New Generation Culture Media Co., Ltd. (霍爾果斯樂視
新生代文化傳媒有限公司)	33,000,000.00
Leshi Zhixin Electronic Technology (Tianjin) Limited (樂視致新電子
科技（天津）有限公司)	31,272,999.64

1. Prepayments

	Opening balance	Ending balance
Prepayments	318,228,189.35	194,739,782.74
Total	318,228,189.35	194,739,782.74

• B. Information about major debtors:

Major debtors Beijing Jizhi Image Film & Television Culture Co., Ltd. (北京集智映像 影視文化有限公司) Film Workshop Company Limited Shanghai Sangeyi Film & Television Culture Media Co., Ltd. (上海叁個 壹影視文化傳媒有限公司) 4. Interests receivable Opening balance Interests receivable 930,471.48 Total 930,471.48 5. Other receivables Opening balance Other accounts receivable 73,414,377.00 Total 73,414,377.00	Ending balance 52,400,000.00 51,737,338.03 34,720,238.79 Ending balance 2,086,671.23 2,086,671.23 Ending balance 1,852,390,268.78
	1,852,390,268.78

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APPENDIX IV

• B. Information about major debtors:

Major debtors Ending balance Legendary East Investment Consulting (Beijing) Co., Ltd. (傳奇東方投資 諮詢（北京）有限公司) 20,227,500.00 Lions Gate Films China (UK) Co., Ltd. (獅門影業中國（英國）有限公司) 17,966,465.75 Goldsome Pictures (Beijing) Co., Ltd. (國勝影業（北京）有限公司) 10,768,141.58 6. Inventories Category Opening balance Ending balance Inventories 232,107,222.75 510,862,951.00 Total 232,107,222.75 510,862,951.00 7. Other current assets Category Opening balance Ending balance Other current assets 13,627,320.22 1,727,886.33 Total 13,627,320.22 1,727,886.33 8. Long-term equity investments Investee Opening balance Ending balance Beijing Lexiangdangran Film & Television Investment Co., Ltd. (北京樂響當然影視投資 有限公司) 1,983,906.44 2,415,078.85 Jiangsu Original Force Animation Co., Ltd. (江蘇 原力電腦動畫製作有限公司) 0.00 100,762,287.50 Total 1,983,906.44 103,177,366.35 9. Fixed assets and accumulated depreciation A. Original value of fixed assets Category Opening balance Increase in the period Decrease in the period Ending balance Fixed assets 1,895,168.53 629,888.72 2,525,057.25 Total 1,895,168.53 629,888.72 2,525,057.25	Major debtors Ending balance Legendary East Investment Consulting (Beijing) Co., Ltd. (傳奇東方投資 諮詢（北京）有限公司) 20,227,500.00 Lions Gate Films China (UK) Co., Ltd. (獅門影業中國（英國）有限公司) 17,966,465.75 Goldsome Pictures (Beijing) Co., Ltd. (國勝影業（北京）有限公司) 10,768,141.58 6. Inventories Category Opening balance Ending balance Inventories 232,107,222.75 510,862,951.00 Total 232,107,222.75 510,862,951.00 7. Other current assets Category Opening balance Ending balance Other current assets 13,627,320.22 1,727,886.33 Total 13,627,320.22 1,727,886.33 8. Long-term equity investments Investee Opening balance Ending balance Beijing Lexiangdangran Film & Television Investment Co., Ltd. (北京樂響當然影視投資 有限公司) 1,983,906.44 2,415,078.85 Jiangsu Original Force Animation Co., Ltd. (江蘇 原力電腦動畫製作有限公司) 0.00 100,762,287.50 Total 1,983,906.44 103,177,366.35 9. Fixed assets and accumulated depreciation A. Original value of fixed assets Category Opening balance Increase in the period Decrease in the period Ending balance Fixed assets 1,895,168.53 629,888.72 2,525,057.25 Total 1,895,168.53 629,888.72 2,525,057.25	Major debtors Ending balance Legendary East Investment Consulting (Beijing) Co., Ltd. (傳奇東方投資 諮詢（北京）有限公司) 20,227,500.00 Lions Gate Films China (UK) Co., Ltd. (獅門影業中國（英國）有限公司) 17,966,465.75 Goldsome Pictures (Beijing) Co., Ltd. (國勝影業（北京）有限公司) 10,768,141.58 6. Inventories Category Opening balance Ending balance Inventories 232,107,222.75 510,862,951.00 Total 232,107,222.75 510,862,951.00 7. Other current assets Category Opening balance Ending balance Other current assets 13,627,320.22 1,727,886.33 Total 13,627,320.22 1,727,886.33 8. Long-term equity investments Investee Opening balance Ending balance Beijing Lexiangdangran Film & Television Investment Co., Ltd. (北京樂響當然影視投資 有限公司) 1,983,906.44 2,415,078.85 Jiangsu Original Force Animation Co., Ltd. (江蘇 原力電腦動畫製作有限公司) 0.00 100,762,287.50 Total 1,983,906.44 103,177,366.35 9. Fixed assets and accumulated depreciation A. Original value of fixed assets Category Opening balance Increase in the period Decrease in the period Ending balance Fixed assets 1,895,168.53 629,888.72 2,525,057.25 Total 1,895,168.53 629,888.72 2,525,057.25	Major debtors Ending balance Legendary East Investment Consulting (Beijing) Co., Ltd. (傳奇東方投資 諮詢（北京）有限公司) 20,227,500.00 Lions Gate Films China (UK) Co., Ltd. (獅門影業中國（英國）有限公司) 17,966,465.75 Goldsome Pictures (Beijing) Co., Ltd. (國勝影業（北京）有限公司) 10,768,141.58 6. Inventories Category Opening balance Ending balance Inventories 232,107,222.75 510,862,951.00 Total 232,107,222.75 510,862,951.00 7. Other current assets Category Opening balance Ending balance Other current assets 13,627,320.22 1,727,886.33 Total 13,627,320.22 1,727,886.33 8. Long-term equity investments Investee Opening balance Ending balance Beijing Lexiangdangran Film & Television Investment Co., Ltd. (北京樂響當然影視投資 有限公司) 1,983,906.44 2,415,078.85 Jiangsu Original Force Animation Co., Ltd. (江蘇 原力電腦動畫製作有限公司) 0.00 100,762,287.50 Total 1,983,906.44 103,177,366.35 9. Fixed assets and accumulated depreciation A. Original value of fixed assets Category Opening balance Increase in the period Decrease in the period Ending balance Fixed assets 1,895,168.53 629,888.72 2,525,057.25 Total 1,895,168.53 629,888.72 2,525,057.25
		103,177,366.35
			Ending balance 2,525,057.25
			2,525,057.25

— 609 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

• B. Accumulated depreciation

		Opening	Increase in	Decrease in	Ending
Category		balance	the period	the period	balance
Accumulated	depreciation	459,824.04	449,892.20		909,716.24
Total		459,824.04	449,892.20		909,716.24

• C. Net value of fixed assets

Category	Opening balance	Ending balance
Net value of fixed assets	1,435,344.49	1,615,341.01
Total	1,435,344.49	1,615,341.01

• D. Provision for impairment of the fixed asset:

As reviewed by the management of the Company, there is no impairment evidence for fixed asset, therefore, no provision is provided for the impairment of the fixed asset.

1. Deferred income tax assets

	Category	Opening balance	Ending balance
	Deferred income tax assets	3,283,999.71	3,397,183.23
	Total	3,283,999.71	3,397,183.23
11.	Other non-current assets
	Category	Opening balance	Ending balance
	Rights to contract with famous directors	123,361,054.44	119,127,953.18
	Total	123,361,054.44	119,127,953.18
12.	Short-term loans
	Category	Opening balance	Ending balance
	Short-term loans	64,415,371.34	163,742,000.00
	Total	64,415,371.34	163,742,000.00

— 610 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

1. Trade payables

		Opening balance	Ending balance
	Trade payables	313,354,941.51	330,892,976.80
	Total	313,354,941.51	330,892,976.80
	B. Information about major creditors:
	Major creditors		Ending balance
	Beijing Galloping Horse Film & TV Production (北京小馬奔騰影業
	有限公司)		54,444,089.71
	Goldsome Pictures Co., Ltd. (國盛影業（北京）有限公司)		10,555,652.61
	Beijing Weying Technology Co.Ltd. (北京微影時代科技有限公司)		3,933,061.24
14.	Advance payments
		Opening balance	Ending balance
	Advance payments	56,125,645.82	239,786,537.05
	Total	56,125,645.82	239,786,537.05
15.	Payroll payable
	Category	Opening balance	Ending balance
	Payroll payable	5,068,530.14	7,274,501.08
	Total	5,068,530.14	7,274,501.08
16.	Taxes payable
	Category	Opening balance	Ending balance
	Taxes payable	5,392,073.53	32,124,260.74
	Total	5,392,073.53	32,124,260.74
17.	Interest payable
	Category	Opening balance	Ending balance
	Interest payable	5,407,944.62	5,375,626.19
	Total	5,407,944.62	5,375,626.19

— 611 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

18. Other payables

		Opening balance	Ending balance
	Other trade payables	11,310,397.02	16,516,157.83
	Total	11,310,397.02	16,516,157.83
	B. Information about major creditors:
	Major creditors		Ending balance
	Accounts receivable and payable		5,686,231.47
	Rental		6,608,744.99
19.	Non-current liabilities due within one year
		Opening balance	Ending balance
	Long-term loans due within one year	19,026,248.00	44,367,245.00
	Bonds payable due within one year	0.00	298,797,867.62
	Total	19,026,248.00	343,165,112.62
20.	Long-term loans
		Opening balance	Ending balance
	Long-term loans	44,367,245.00	0.00
	Total	44,367,245.00	0.00
21.	Bonds payable
		Opening balance	Ending balance
	Bonds payable	297,328,172.43	0.00
	Total	297,328,172.43	0.00
22.	Paid-in capitals
	Shareholders	Opening balance	Ending balance
	Share capitals	836,792,444.00	836,792,444.00
	Total	836,792,444.00	836,792,444.00

— 612 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

23.	Capital reserves
	Item	Opening balance	Ending balance
	Capital reserves	2,205,623,843.22	2,283,565,643.22
	Total	2,205,623,843.22	2,283,565,643.22
24.	Surplus reserves
	Item	Opening balance	Ending balance
	Surplus reserves	184,738.38	184,738.38
	Total	184,738.38	184,738.38
25.	Undistributed profits
	Item	Opening balance	Ending balance
	Undistributed profits	-1,006,504,299.38	-861,067,962.13
	Total	-1,006,504,299.38	-861,067,962.13
	Note: For details of share-based payment, please refer to Note IX of this section.
26.	Other comprehensive incomes
	Item	Opening balance	Ending balance
	Translation difference of the foreign currency
	statements	-175,562.50	-812,075.86
	Total	-175,562.50	-812,075.86
(II)	The Company’s operating results of 2016:
1.	Business incomes
	Item		Balance of the year
	Business incomes		1,098,268,148.98
	Total		1,098,268,148.98

— 613 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

1. Operating costs

Item		Balance of the year
Operating	costs	573,364,855.33
Total		573,364,855.33

1. Business taxes and surcharges

	Item	Balance of the year
	Business taxes and surcharges	1,014,293.66
	Total	1,014,293.66
4.	Selling expenses
	Item	Balance of the year
	Selling expenses	204,495,836.12
	Total	204,495,836.12
5.	Management fees
	Item	Balance of the year
	Management fees	183,949,909.17
	Total	183,949,909.17

Note: For details of share-based payment, please refer to Note IX of this section.

1. Financial expenses

	Item	Balance of the year
	Financial expenses	-16,756,562.99
	Total	-16,756,562.99
7.	Asset impairment losses
	Item	Balance of the year
	Asset impairment losses	1,615,241.59
	Total	1,615,241.59

— 614 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

1. Investment incomes

Item Balance Investment incomes Total	of the year -648,940.09
	-648,940.09

9.	Non-operating incomes
	Item	Balance of the year
	Non-operating incomes	32,503,525.59
	Total	32,503,525.59
10.	Income tax expenses
	Item	Balance of the year
	Income tax expenses	36,914,801.37
	Total	36,914,801.37

IX Share-based payment

1.	Overall condition of share-based payment
		Amount	Amount	Amount
	Item	in 2016	in 2015	in 2014
	Total equity instruments granted by the
	Company in the current period	77,941,800.00	221,079,600.00	955,084,940.22
	Total exercised equity instruments of the
	Company in current period	77,941,800.00	221,079,600.00	955,084,940.22
	Total invalid equity instruments of the
	Company in current period	—		—
	Range of exercise price of the Company’s
	outstanding shares option at the end of
	the period and the remaining period of
	the contract	—		—
	Range of exercise price of the Company’s
	other equity instruments at the end of
	the period and the remaining period of
	the contract	—		—

— 615 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

1. Condition of equity-settled share-based payment

	Amount	Amount	Amount
Item	in 2016	in 2015	in 2014

Measures for the confirmation of Capital increase and transfer of fair value by shareholders in the fair value of the equity recent period instruments on the grant date Basis for determining the number Allotment number of incentive shares approved by the Board of the vested equity instruments of the Company Reasons for any significant difference between the estimate in current period and that in previous period: Accumulative amount of equity-settled share-based payment included in capital reserve 1,254,106,340.22 1,176,164,540.22 955,084,940.22 Total expenses of equity-settled share-based payment recognized in current period 77,941,800.00 221,079,600.00 955,084,940.22

X. Other Important Events

As at the publication date of this audit report, there is no other important event occurred in the Company.

Le Vision Pictures (Beijing) Co., Ltd. 31 December 2016

— 616 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

B. UNAUDITED CONSOLIDATED FINANCIAL STATEMENTS OF LESHI INTERNET FOR THE FIRST QUARTER ENDED 31 MARCH 2017

The following are the text of the review report issued by the auditor of Leshi Pictures, Beijing Pudongde CPA Co., Ltd. (general partnership) and the unaudited consolidated financial statements of Leshi Pictures for the first quarter ended 31 March 2017, which were prepared in accordance with the CAS. These review report and unaudited consolidated financial statements are not prepared for incorporation into this circular, and are included in this circular for information purposes only. These review report and financial statements were issued in Chinese and the English translated version is provided for information purposes only. In case of discrepancies between the two versions, the Chinese version shall prevail.

The Directors wish to emphasize that the extracts reproduced below are not prepared for incorporation into this circular and the Group has not participated in their preparation. As such, the Directors do not express any view as to their truth, accuracy or completeness, and the Shareholders and investors should exercise caution and should not place undue reliance on such information.

Review Report

Pu Shen Zi [2017] No. I-0060

All shareholders of Le Vision Pictures (Beijing) Co., Ltd.,

We have reviewed the attached consolidated financial statements of Le Vision Pictures (Beijing) Co., Ltd. (hereinafter referred to as the “Company”) for the first quarter of 2017, including the consolidated balance sheets as at 31 March 2017, the consolidated profit statements, consolidated cash flow statements from January to March of 2017 and notes to the consolidated financial statements.

The management of Le Vision Pictures (Beijing) Co., Ltd. is responsible for preparing financial statements in accordance with the Accounting Standards for Business Enterprises and the Enterprise Accounting System. These responsibilities include: (1) designing, implementing and maintaining relevant internal control to avoid material misstatement in these financial statements resulting from fraudulence or mistakes; (2) selecting and applying appropriate accounting policies; and (3) making reasonable accounting estimates.

Our responsibility is to issue a review report on the financial statements based on our review. We conducted our review in accordance with China Standards on Reviewing No.2101 — - Financial Statements Reviewing. The standard requires that we plan and perform the review to obtain moderate assurance about whether the financial statements are free of material misstatement. A review is limited primarily to inquiries of the Company personnel and analytical procedures applied to financial data and thus provides less assurance than an audit. We have not performed an audit and, accordingly, we do not express an audit opinion.

— 617 —

APPENDIX IV FINANCIAL INFORMATION OF LESHI PICTURES

Based on our review, nothing has come to our attention that causes us to believe that the financial statements of the Company for the first quarter of 2017 do not present fairly, in all material respects, the financial position of the Company and its financial performance and its cash flows in accordance with Accounting Standards for Business Enterprises.

Beijing Puhongde CPA Co., Certified Public Accountant of China: (senior accountant): Ltd. (general partnership) Beijing, PRC Certified Public Accountant of China:

30 June 2017

— 618 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

Consolidated Balance Sheet

as at 31 March 2017

Prepared by: Le Vision Pictures (Beijing) Co.,	Ltd.		Unit: RMB
Assets	Column No.	**Closing Balance **	Opening Balance
Current assets:
Monetary funds	1	246,992,690.71	193,192,444.31
Financial assets held for trading	2
Notes receivable	3
Accounts receivable	4	547,045,230.16	415,602,755.30
Advance payment	5	206,965,219.78	194,739,782.74
Interest receivable	6	2,086,671.23	2,086,671.23
Dividend receivable	7
Other receivables	8	1,774,781,101.71	1,852,390,268.78
Inventory	9	622,181,101.63	510,862,951.00
Non-current assets maturing within one year	10
Other current assets	11	2,812,706.24	1,727,886.33
Total current assets	12	3,402,864,721.47	3,170,602,759.69
Non-current assets:
Financial assets available for sale	13
Held-to-maturity investments	14
Long-term accounts receivables	14
Long-term equity investments	15	103,177,366.35	103,177,366.35
Investment real estate	15
Fixed assets	16	1,655,766.70	1,615,341.01
Construction in process	16
Project materials	17
Disposal of fixed assets	17
Productive biological assets	18
Oil and gas assets	18
Intangible assets	19
Development expenses	19
Goodwill	20
Long-term unamortized expenses	20
Deferred income tax assets	21	3,397,183.23	3,397,183.23
Other non-current assets	22	120,322,127.94	119,127,953.18
Subtotal for non- current assets	23	228,552,444.22	227,317,843.77
Total assets	24	3,631,417,165.69	3,397,920,603.46

— 619 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

Liabilities and owner’s equity (or shareholders’ equity) Column No. Closing Balance Opening Balance Current liabilities:

Current liabilities:
Short-term loans	25	99,900,000.00	163,742,000.00
Financial liabilities held for trading	26
Notes payable	27
Accounts payable	28	443,903,853.22	330,892,976.80
Advance receipt	29	420,296,849.22	239,786,537.05
Payroll payable	30	3,649,020.36	7,274,501.08
Taxes payable	31	13,714,611.83	32,124,260.74
Interest payable	32	4,807,476.45	5,375,626.19
Dividends payable	33
Other payables	34	39,295,335.62	16,516,157.83
Non-current liabilities maturing within one
year	35	314,205,804.32	343,165,112.62
Other current liabilities	36
Total current liabilities	37	1,339,772,951.02	1,138,877,172.31
Non-current liabilities:
Long-term loans	38
Bonds payable	39
Long-term payable	40
Special accounts payable	41
Accrued liabilities	42
Deferred income tax liabilities	41
Other non-current liabilities	42
Total non-current liabilities	43	0.00	0.00
Total liabilities	44	1,339,772,951.02	1,138,877,172.31
Owner’s equity (or shareholder’s equity):
Paid-in capital (or share capital)	45	836,792,444.00	836,792,444.00
Capital reserves	46	2,283,565,643.22	2,283,565,643.22
Less: treasury stock	47
Other comprehensive incomes	48	-973,801.08	-812,075.86
Surplus reserves	49	184,738.38	184,738.38
Undistributed profits	50	828-,290,217.81	-861,067,962.13
Total equity attributable to shareholders of the
parent company	51	2,291,278,806.71	2,258,662,787.61
Minority equity	52	365,407.95	380,643.54
Total owner’s equity (or shareholder’s equity)	53	2,291,644,214.66	2,259,043,431.15
Total liabilities and owner’s equity (or
shareholder’s equity)	54	3,631,417,165.69	3,397,920,603.46

— 620 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

Consolidated income statement

From January to March in 2017

Prepared by: Le Vision Pictures (Beijing) Co., Ltd.

Unit: RMB

			Amount in
Items		Column No.	current year
I.	Revenue	1	93,356,417.43
Less:	operating costs	2	20,186,768.09
	Business taxes and surcharges	3	687,179.92
	Selling expenses	4	14,074,657.59
	Management fees	5	16,389,169.19
	Financial expenses	6	7,179,189.45
	Asset impairment losses	7
Add:	incomes from changes in fair value (loss is indicated by
	“-”)	8
	Investment incomes (loss is indicated by “-”)	9
	Including: investment incomes from joint ventures and
	associates	10
II.	Operating profits (deficit is indicated by “-”)	11	34,839,453.19
Add:	Non-operating incomes	12	112,186.45
Less:	non-operating expenses	13	630,264.43
	Including: disposal losses from non-current assets	14
III.	Total profits (the total loss expressed with “-”)	15	34,321,375.21
Less:	income tax expenses	16	1,558,866.47
IV.	Net profits (the net loss expressed with “-”)	17	32,762,508.73
Including: net profit attributed to owners of parent company		18	32,777,744.32
	Gains/losses of minority shareholders	19	-15,235.59
V.	Earnings per share:	20
(I)	Basic EPS	21
(II)	Diluted EPS	22

— 621 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

Consolidated cash flow statement From January to March in 2017

AC03

Prepared by: Le Vision Pictures (Beijing) Co., Ltd.	Prepared by: Le Vision Pictures (Beijing) Co., Ltd.		Unit: RMB
Items		Column No.	Amount
I.	Cash flows from operating activities:	1
	Cash received from sales of goods and rendering of services	2	274,047,194.60
	Tax refunds received	3	593,966.28
	Cash received relating to other operating activities	4	264,393,068,36
	Subtotal for cash inflow	5	539,034,229.24
	Cash paid for goods or receiving services	6	210,471,738.36
	Cash paid to and on behalf of employees	7	18,645,224.60
	Tax payments	8	22,301,952.80
	Cash paid relating to other operating activities	9	133,143,547.49
	Subtotal for cash outflows	10	384,562,463.25
	Net cash flows from operating activities	11	154,471,765.99
II.	Cash flows from investment activities:	12
	Cash received from disposal of investments	13
	Cash received from investment income	14
	Net amount of cash resulted from disposal of fixed assets,
	intangible assets and other long term assets	15
	Cash received relating to other investing activities	16
	Subtotal for cash inflow	17	—
	Cash paid to acquire fixed assets, intangible assets and other
	long-term assets	18
	Cash paid for investments	19
	Cash paid relating to other investing activities	20	—
	Subtotal for cash outflows	21	—
	Net cash flows from investment activities	22	—

— 622 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

Items	Items	Column No.	Amount
III.	Cash flows from financing activities:	23
	Cash received by investors	24
	Cash received from borrowings	25
	Other cash received related to financing activities	26
	Subtotal for cash inflows	27	—
	Cash paid for repayments of debts	28	94,899,985.00
	Cash paid for distribution of dividends or profits, or cash
	payments for interests	29	5,545,819.80
	Other cash paid related to financing activities	30
	Subtotal for cash outflows	31	100,445,804.80
	Net cash flows from financing activities	32	-100,445,804.80
IV.	Effect of exchange rate movement on cash	33	-225,714.79
V.	Net increments of cash and cash equivalent	34	53,800,246.40
	Add: opening balance of cash and cash equivalents	35	193,192,444.31
VI.	Balance of cash and cash equivalent at the end of period	36	246,992,690.71

— 623 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

Le Vision Pictures (Beijing) Co., Ltd. NOTES TO THE CONSOLIDATED ACCOUNTING STATEMENTS

As at 31 March, 2017

(In RMB, unless otherwise stated)

I. Company Profile

Le Vision Pictures (Beijing) Co., Ltd. (hereinafter referred to as the “Company”) was established on December 28th, 2011. It was registered with Huairou branch of Beijing Administration for Industry and Commerce, and was issued the business license with an unified social credit code 91110116589133454J. Its registered capital is RMB836,792,444.

Legal representative: Zhang Zhao.

The subscribed amount of registered capital and the proportion of capital contribution made by each of the shareholders are as below:

		Unit: RMB
	Subscribed	Proportion
	amount of	of capital
Investors	registered capital	contribution
	(0’000)	(%)
LeTV Holdings (Beijing) Co., Ltd. (樂視控股
（北京）有限公司)	36,303.11	43.3837%
Le’an Yingyun (Tianjin) Culture Communication
Partnership (Limited Partnership) (樂安影雲（天津）文化
傳播合夥企業（有限合夥）)	6,460.55	7.7206%
Shanghai Chunhua Jingli Investment Center (Limited
Partnership) (上海春華景立投資中心（有限合夥）)	3,599.11	4.3011%
Zhang Zhao (張昭)	3,204.16	3.8291%
Shenzhen LeTV Xingenyihao Investment Management
Enterprise (Limited Partnership) (深圳市樂視鑫根壹號投
資管理企業（有限合夥）)	2,999.26	3.5842%
Beijing Yinye Jinhong Investment Partnership (Limited
Partnership) (北京銀葉金宏投資合夥企業（有限合夥）)	2,856.97	3.4142%
Lepu Yingtian (Tianjin) Culture Communication
Partnership (Limited Partnership) (樂普影天（天津）文化
傳播合夥企業（有限合夥）)	2,849.04	3.4047%
Beijing Siwei Equity Investment Management Center
(Limited Partnership) (北京思偉股權投資管理中心
（有限合夥）)	2,399.40	2.8674%
Ma Xuefeng (馬雪峰)	2,048.89	2.4485%

— 624 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

	Subscribed	Proportion
	amount of	of capital
Investors	registered capital	contribution
	(0’000)	(%)
Liu Hong (劉弘)	1,521.61	1.8076%
Lezheng Rongtong (Tianjin) Cultural Communication
Partnership (Limited Partnership) (樂正榮通（天津）文化
傳播合夥企業（有限合夥）)	1,438.19	1.7187%
Li Li (李力)	1,422.67	1.7001%
Beijing Jinyang Asset Management Center (Limited
Partnership) (北京錦陽資產管理中心（有限合夥）)	1,379.66	1.6488%
Shenzhen Weigang Lingyi Investment Co., Ltd.
(深圳市維港零壹投資有限公司)	1,285.66	1.5364%
Yongtai Xinfeng Investment Co., Ltd.
(永泰鑫豐投資有限公司)	1,285.66	1.5364%
Zhang Yimou (張藝謀)	1,201.53	1.4359%
Sichuan Hongyi Industrial Group Co., Ltd.
(四川宏義實業集團有限公司)	1,124.92	1.3443%
Shanghai Jinglinjingqi Investment Center (Limited
Partnership) (上海景林景麒投資中心（有限合夥）)	1,011.36	1.2086%
Shenzhen Innovation Investment Group Co., Ltd.
(深圳市創新投資集團有限公司)	878.8775	1.0503%
Xue Mei (薛梅)	703.083	0.8402%
Shenzhen Hongtu Information Venture Capital Co., Ltd.
(深圳市紅土信息創業投資有限公司)	703.0064	0.8401%
Shanghai Jinglinjingtu Investment Center (Limited
Partnership) (上海景林景途投資中心（有限合夥）)	691.33	0.8262%
Beijing LeTV Xingyun Investment Center (Limited
Partnership) (北京樂視星雲投資中心（有限合夥）)	527.295	0.6301%
Beijing Rongxinhang Fund Management Center (Limited
Partnership) (北京融信行基金管理中心（有限合夥）)	351.5068	0.4201%
Shijiazhuang Hongtujishen Venture Capital Co., Ltd.
(石家莊紅土冀深創業投資有限公司)	527.2883	0.6301%
Hebei Hongtu Venture Capital Co., Ltd.
(河北紅土創業投資有限公司)	527.2166	0.6300%
Guo Jingming (郭敬明)	500	0.5975%
Shanghai Xishida Electronic Technology Co., Ltd.
(上海喜仕達電子技術有限公司)	428.5761	0.5122%
Shanghai Huixinghuiying Screen Culture Studio
(上海慧形慧影影視文化工作室)	359.9107	0.4301%
Li Weiran (李蔚然)	344.8655	0.4121%
Zhao Yue (趙越)	321.4321	0.3841%
Liu Youliang (劉優良)	321.4321	0.3841%

— 625 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

	Subscribed	Proportion
	amount of	of capital
Investors	registered capital	contribution
	(0’000)	(%)
Ji Xiaoqing (吉曉慶)	312.5149	0.3735%
Hengtai Capital Investment Co., Ltd.
(恒泰資本投資有限責任公司)	285.6943	0.3414%
Diao Lili (刁麗莉)	281.2469	0.3361%
Sun Honglei (孫紅雷)	239.9405	0.2867%
Shanghai Sun Li Screen Culture Studio
(上海孫儷影視文化工作室)	239.9405	0.2867%
Shanxi Xierun Investment Co., Ltd.
(山西協潤投資有限公司)	142.8817	0.1708%
Yu Zhong (於忠)	128.5728	0.1537%
Wu Lin (吳林)	119.9702	0.1434%
Feng Wei (馮威)	119.9702	0.1434%
Taoyun (Beijing) Film & Television Investment
Management Co., Ltd. (韜蘊（北京）影視投資管理有限公
司)	119.9702	0.1434%
Huang Xiaoming (黃曉明)	59.9851	0.0717%
Li Xiaolu (李小璐)	59.9851	0.0717%
Total	83,579.2444	100.00%

The registered address of the Company is: Unit 1002, Block A, No. 9 Fengxiang East Street, Yangsong town, Huairou district, Beijing

The Company’s main business scope includes: production and release of cartoons, feature films and television variety; not allowed to produce political news and similar topics, columns and other radio and television programs; film distribution; investment management; asset management; lease of film and television equipment; film and television planning; training on film and television production technology; organization of cultural and artistic exchange activities (excluding performances); design, production, agent and releasing of advertisements; conference services; economic information consultation; market survey; technique extension services; technology development of film and television derivatives; sales of apparel, cultural goods and daily necessities; cultural brokers and personal performance brokers; ticketing agents (excluding air ticket sales agents).

II. Major Accounting Policies

1. Accounting system:

The Company implements the Accounting Standards for Business Enterprises and its supplementary provisions.

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APPENDIX IV

2. Fiscal period:

The fiscal year of the Company begins on January 1 and ends on December 31 of the Gregorian calendar.

3. Accounting principles and valuation basis:

The accounting of the Company adopts the accrual-basis principle and the debit-credit bookkeeping method, and the asset valuation is based on historical cost.

4. Translation between the recording currency and foreign currencies

The recording currency of the Company is RMB.

In the case of economic transactions involving any foreign currency, such foreign currency transactions are accounted for in the recording currency translated at the market exchange rates at the beginning of the month, and the exchange gains and losses arising from the adjustment to exchange rates at the end of each year are charged to the financial expenses.

1. Accounting treatment of business combinations under common control and under non-common control

2. (1) Business combination under common control

Where the enterprises involved in the combination are ultimately controlled by the same party or the same parties before and after the combination and such control is not temporary, it is a business combination under common control. The assets and liabilities acquired by the acquirer in the business combination are measured at the carrying amount of the acquiree on the combination date. The difference between carrying amounts of the net assets acquired and the combination consideration paid (or total value of the issued shares) by the acquirer is adjusted to the capital reserve; if the capital reserve is insufficient to offset, the retained earnings shall be adjusted.

(2) Business combination under non-common control

Business combination under non-common control refers to a combination where the parties involved in the combination are not ultimately controlled by the same party or the same parties before and after the combination. The combination costs of the acquirer are the fair value of assets paid, liabilities incurred or undertaken and equity securities issued by the acquirer on the acquisition date in order to obtain control over the acquiree.

Where the combination cost is higher than the fair value of identifiable net assets aquired from the acquiree in a business combination, the acquirer shall recognize such difference as goodwill. Where the combination cost is less than the fair value of identifiable net assets acquired from the acquiree in a business combination, the acquirer shall recognize such difference in the profit or loss for the period.

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APPENDIX IV

The assets paid, liabilities incurred or undertaken by the acquirer on the acquisition date for the consideration of the business combination shall be measured at the fair value, and the difference between the fair value and the carrying amount shall be included in the profit or loss for the period.

Preparation method of consolidated financial statements:

The consolidated financial statements are prepared in accordance with the “Accounting Standards for Business Enterprises No. 33 - Consolidated Financial Statements” issued in February 2006. All subsidiaries and special purpose entities controlled by the Company are included in the consolidation scope of the consolidated financial statements. From the date of obtaining actual control over a subsidiary, the Company begins to consolidate it and ceases to consolidate it from the date of loss of actual control. The consolidated financial statements are based on the individual financial statements of the parent company and the subsidiaries included in the consolidation scope, and are prepared by the parent company based on other relevant information after making adjustment to the long-term equity investment in the subsidiaries under the equity method.

All significant intra-group balances, transactions and unrealized profits are offset when the consolidated financial statements are prepared. The part of shareholders’ equity of a subsidiary which is not attributable to the parent company is presented separately as minority interest in the shareholders’ equity in the consolidated financial statements.

If the accounting policies or accounting periods adopted by the subsidiaries are inconsistent with those of the parent company, the financial statements of the subsidiaries shall be adjusted in accordance with the accounting policies or accounting periods of the parent company when preparing the consolidated financial statements.

For subsidiaries acquired upon business combinations under non-common control, in preparing the consolidated balance sheets, the individual financial statements shall be adjusted on the basis of the fair value of the identifiable net assets on the acquisition date; for subsidiaries acquired upon business combinations under common control, in preparing the consolidated balance sheets, the assets, liabilities, operating results and cash flows of such subsidiaries are included in the consolidated financial statements from the beginning of the earliest period during the reporting period, as if the business combinations have occurred at the beginning of the earliest period during the reporting period, and the net profit realized before the combination date is reflected under separate items in the consolidated income statements.

6. Preparation method of consolidated financial statements

(1) Consolidation scope

The consolidation scope of the consolidated financial statements of the Company is determined on the basis of control.

The parent company directly owns or, through its subsidiaries, indirectly owns the majority of the voting rights of the investees and if the parent company has control over the investees, such investees are classified as subsidiaries and included in the scope of consolidation in the consolidated

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APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

financial statements. If the parent company has 50% or below voting rights of the investees and fulfils one of the following conditions, it is deemed that the parent company has control over the investees. Accordingly, such investees will be classified as subsidiaries and included in the scope of consolidation in the consolidated financial statements:

• A. owns the majority of the voting rights in the investees through the agreement between the investees and other investors;

• B. has the right to decide on the financial and operating policies of the investees in accordance with the articles or other requirements;

• C. has the power to appoint or remove the majority of the members of the board or similar committees of the investees;

• D. has the majority of voting rights in the board or similar committees of the investees.

If there is any evidence that the parent company does not have control over the investees, such investees shall not be included in the scope of consolidation in the financial statements.

(2) Preparation method of consolidated financial statements

The consolidated financial statements of the Company are prepared based on the individual financial statements of the subsidiaries that are within the scope of consolidation. Based on other relevant information, the long-term equity investments in the subsidiaries are adjusted under the equity method to offset the impact of the internal transactions entered into between the parent company and the subsidiaries and among the subsidiaries on the consolidated statements.

(3) Minority interests and presentation of profit or loss

The shareholders’ equity of the subsidiaries is not accounted for as equity of the parent company but as minority interests. In the consolidated balance sheet, the shareholders’ equity is presented under “minority interests”.

The profit or loss of the subsidiaries for the period is accounted for as minority interests and presented under “minority interests” in net profits in the consolidated income statement.

(4) Treatment of excess loss

In the consolidated income statements, if the loss for the period attributable to minority shareholders of a subsidiary exceeds the shareholders’ equity attributable to minority shareholders in such subsidiary at the beginning of the period, the balance shall be offset against the minority interests.

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APPENDIX IV

• (5) Accounting treatment of acquisition and disposal of subsidiaries for the period in consolidated statements

During the reporting period, for subsidiaries acquired upon business combination under common control, in preparing the consolidated balance sheet, the opening balance of the consolidated balance sheet shall be adjusted. For subsidiaries acquired upon business combination under non-common control, in preparing the consolidated balance sheet, the opening balance of the consolidated balance sheet shall not be adjusted. For disposal of subsidiaries during the reporting period, in preparing the consolidated balance sheet, the opening balance of the consolidated balance sheet shall not be adjusted.

During the reporting period, for subsidiaries acquired upon business combination under common control, the income, expenses and profits of such subsidiaries from the beginning of the consolidation period to the end of the reporting period shall be included in the consolidated income statement. For subsidiaries acquired upon business combination under non-common control, the income, expenses and profits of such subsidiaries from the acquisition date to the end of the reporting period shall be included in the consolidated income statement. For disposal of subsidiaries during the reporting period, the income, expenses and profits of such subsidiaries from the beginning of the period to the disposal date shall be included in the consolidated income statement.

During the reporting period, for subsidiaries acquired upon business combination under common control, the cash flow of such subsidiaries from the beginning of the consolidation period to the end of the reporting period shall be included in the consolidated cash flow statement. For subsidiaries acquired upon business combination under non-common control, the cash flow of such subsidiaries from the acquisition date to the end of the reporting period shall be included in the consolidated cash flow statement. For disposal of subsidiaries during the reporting period, the cash flow of such subsidiaries from the beginning of the period to the disposal date shall be included in the consolidated cash flow statement.

1. Accounting method of bad debt

2. 7.1 Recognition principle for bad debt:

The Company will recognize bad debt based on:

• (1) the irrecoverable amount of the debtor who has gone bankrupt or has died and has insufficient asset to repay;

• (2) the irrecoverable amount, demonstrated by sufficient evidence and approved to write off, of a debtor who does not comply with his/her repayment obligation over three years.

• 7.2 The Company adopts the aging analysis method in the allowance method for accounting its bad debts.

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APPENDIX IV

8. Accounting method of inventories

Purchase and storage of raw materials are measured at the cost actually incurred. Low value consumables are fully amortized at one time or amortized by several times when they are issued, depending on different circumstances.

9. Accounting method of long-term investment

The long-term investment of the Company is stated at the actual payment or the determined value at the time of investment, and is accounted for by using equity method.

10. Accounting method of fixed assets

• 10.1 Criteria for fixed assets:

Fixed assets are house, building, machine, equipment, transport vehicle and other equipment, apparatus and tools related to production and operation, which have useful lives of more than one year, as well as assets that are not major equipment for production and operation purposes, which have useful lives of more than two years.

• 10.2 Fixed assets measurement:

Fixed assets are measured at their actual costs.

• 10.3 Fixed assets are depreciated using the straight-line method.

11. Accounting method of construction in progress

The Company’s construction in progress is accounted for project by project and stated at the total expenses actually incurred, and transferred to fixed assets at the date of reaching its intended usable conditions at the full cost of the project. The borrowing costs (such as interest expenses on borrowings, exchange gains and losses and foreign currency translation differences) directly related to the construction of the construction in progress, are capitalized before the project reaches its intended usable condition and included in the project cost. After the project reaches its intended usable condition, the borrowing costs above-mentioned are included in the current profits and losses.

The Company’s construction in progress is measured at the lower of its carrying amount and the recoverable amount at the end of the year. The impairment loss on construction in progress is provided separately based on the difference between the recoverable amount of an individual asset and its carrying value, and included in the current profits and losses.

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FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

12. Accounting method of intangible assets

Intangible assets of the Company refer to the long-term non-monetary assets held by the Company for production or supply of goods or services, for rental to others, or for administrative purposes, which have no physical shape. Intangible assets are stated for at the actual cost at the time of acquisition and amortized in 10 years by installments and are recognized in profit or loss in each amortization period.

13. Recognition of revenue

In addition to satisfying the conditions that the economic benefits in connection with transactions can flow into the Company and that the relevant revenue can be reliably measured, recognition of revenue of the Company shall also satisfy:

• 13.1 Revenue from sales of goods: revenue from sales of goods is recognized as operating revenue if the major risk and reward in connection with the ownership of the product has been transferred by the Company to the buyer, the Company no longer has custody and de facto control over the product, related revenue or evidence of entitlement to receivables has been received and the costs related to the sales of such product can be reliably measured.

• 13.2 Revenue from provision of labor services: for labor services which are commenced and completed in the same year, revenue is recognised as operating revenue upon the labor services have been rendered, consideration or evidence of entitlement to the consideration has been received. For labor services which are commenced and completed in different years, the relevant revenue is recognized according to the percentage of completion.

14. Accounting treatment of income tax

The Company calculates its income tax by using taxes payable method. The taxable income, which is the basis for calculating current income tax, is determined after making adjustment to the pre-tax accounting profit for the current year according to relevant tax law provisions.

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FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

15. Taxes

The main taxes paid and tax rates applied by the Company are set out below:

Taxes	Tax rates	Notes
VAT		Tax free
VAT	6%/3%	Calculated based on taxable income
Construction fee for cultural	3%	Calculated based on taxable income
undertakings
Urban maintenance and construction	5%	Calculated as 5% of turnover tax
tax		payable
Education surcharge	3%	Calculated as 3% of turnover tax
		payable
Local education surcharge	2%	Calculated as 2% of turnover tax
		payable
Enterprise income tax	25%	Accounted for by using taxes payable
		method
Individual income tax		Deducted and paid by the Company on
		behalf of the individual

III. Contingencies

As of 31 March 2017, the Company did not have any contingencies to disclose.

IV. Events Subsequent to Balance Sheet Date:

As of 31 March 2017, the Company did not have any subsequent events to disclose.

V. Related Parties Relationship and Related Party Transactions:

Name of related parties	Type of related parties
Leshi Holding (Beijing) Co., Ltd. (樂視控股（北京）有限公司)	Investor
Sichuan Hongyi Industrial Group Co., Ltd.
(四川宏義實業集團有限公司)	Investor
Shijiazhuang Hongtujishen Venture Capital Co., Ltd.
(石家莊紅土冀深創業投資有限公司)	Investor
Hebei Hongtu Venture Capital Co., Ltd.
(河北紅土創業投資有限公司)	Investor
Shenzhen Innovation Investment Group Co., Ltd.
(深圳市創新投資集團有限公司)	Investor
Beijing LeTV Xingyun Investment Center (Limited Partnership)
(北京樂視星雲投資中心（有限合夥）)	Investor

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FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

Name of related parties	Type of related parties
Shenzhen Hongtu Information Venture Capital Co., Ltd.
(深圳市紅土信息創業投資有限公司)	Investor
Shanghai Jinglinjingqi Investment Center (Limited Partnership)
(上海景林景麒投資中心（有限合夥）)	Investor
Shanghai Jinglinjingtu Investment Center (Limited Partnership)
(上海景林景途投資中心（有限合夥）)	Investor
Lepu Yingtian (Tianjin) Culture Communication Partnership
(Limited Partnership) (樂普影天（天津）文化傳播合夥企業（有限
合夥）)	Investor
Lezheng Rongtong (Tianjin) Culture Communication Partnership
(Limited Partnership) (樂正榮通（天津）文化傳播合夥企業（有限
合夥）)	Investor
Le’an Yingyun (Tianjin) Culture Communication Partnership
(Limited Partnership) (樂安影雲（天津）文化傳播合夥企業（有限
合夥）)	Investor
Shenzhen Weigang Lingyi Investment Co., Ltd.
(深圳市維港零壹投資有限公司)	Investor
Shanghai Xishida Electronic Technology Co.,
Ltd.(上海喜仕達電子技術有限公司)	Investor
Hengtai Capital Investment Co., Ltd. (恒泰資本投資有限責任公司)	Investor
Shanxi Xierun Investment Co., Ltd. (山西協潤投資有限公司)	Investor
Beijing Yinye Jinhong Investment Partnership (Limited Partnership)
(北京銀葉金宏投資合夥企業（有限合夥）)	Investor
Shanghai Chunhua Jingli Investment Center (Limited Partnership)
(上海春華景立投資中心（有限合夥）)	Investor
Shenzhen LeTV Xingenyihao Investment Management Enterprise
(Limited Partnership) (深圳市樂視鑫根壹號投資管理企業
（有限合夥）)	Investor
Beijing Siwei Equity Investment Management Center (Limited
Partnership) (北京思偉股權投資管理中心（有限合夥）)	Investor
Shanghai Huixinghuiying Screen Culture Studio
(上海慧形慧影影視文化工作室)	Investor
Shanghai Sun Li Screen Culture Studio (上海孫儷影視文化工作室)	Investor
Taoyun (Beijing) Film & Television Investment Management Co.,
Ltd. (韜蘊（北京）影視投資管理有限公司)	Investor
Beijing Jinyang Asset Management Center (Limited Partnership)
(北京錦陽資產管理中心（有限合夥）)	Investor
Beijing Rongxinhang Fund Management Center (Limited
Partnership) (北京融信行基金管理中心（有限合夥）)	Investor
Yongtai Jinfeng Investment Co., Ltd. (永泰金豐投資有限公司)	Investor
Leying Network Information (Tianjin) Co., Ltd. (樂影網絡信息
（天津）有限公司)	Subsidiary

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FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

Name of related parties Type of related parties Le Vision Pictures (Tianjin) Co., Ltd. (樂視影業（天津）有限公司) Subsidiary Leyi Culture Broker (Beijing) Co., Ltd. (樂藝文化經紀（北京）有限 公司) Subsidiary Khorgos Le Vision Pictures Co., Ltd. (霍爾果斯樂視影業有限公司) Subsidiary Le Vision Pictures (HK) Co., Limited Subsidiary Le Vision Pictures (US) Co., Limited (樂視影業（美國）有限公司) Sub-subsidiary

VI. Significant Assets Transfer and Disposal:

The Company did not have any significant asset transfer and disposal to explain during January to March of 2017.

VII. Business Combination

1. Particulars of subsidiaries

• (1) Subsidiaries acquired through establishment or investment

			Registered	Proportion of	Whether
		Place of	capital	shareholding	statements are
Full name of subsidiary	Type of subsidiary	incorporation	(’0,000)	(%)	combined
Leying Network Information (Tianjin) Co., Ltd.	Limited company	Tianjin	RMB100	100%	Yes
(樂影網絡信息（天津）有限公司)
Le Vision Pictures (Tianjin) Co., Ltd. (樂視影業	Limited company	Tianjin	RMB1000	100%	Yes
（天津）有限公司)
Leyi Culture Broker (Beijing) Co., Ltd.	Limited company	Beijing	RMB100	70%	Yes
(樂藝文化經紀（北京）有限公司)
Khorgos Le Vision Pictures Co., Ltd.	Limited company	Xinjiang	RMB300	100%	Yes
(霍爾果斯樂視影業有限公司)
Le Vision Pictures (HK) Co., Limited	Limited company	Hong Kong	USD8000	100%	Yes

2. Particulars of sub-subsidiaries

(1) Sub-subsidiaries acquired through establishment or investment

			Registered	Proportion of	Whether
	Type of	Place of	capital	shareholding	statements are
Full name of sub-subsidiary	sub-subsidiary	incorporation	(’0,000)	(%)	combined
Le Vision Pictures (US) Co., Limited (樂視影業	Limited company	United States	USD50	100%	Yes
（美國）有限公司)

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FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

VIII. Notes to the Relevant Items of Accounting Statements

(I) Financial positions of the Company as at 31 March 2017:

The Company had total assets, total liabilities, undistributed profits, equity attributable to shareholders of the parent company and minority interests of RMB3,631,417,165.69, RMB 1,339,772,951.02, RMB -828,290,217.81, RMB 2,291,278,806.71, RMB 365,407.95 respectively.

1. Monetary funds

Item Opening balance Ending balance Monetary funds 193,192,444.31 246,992,690.71 Total 193,192,444.31 246,992,690.71

1. Accounts receivable

Opening balance Ending balance Accounts receivable 415,602,755.30 547,045,230.16 Total 415,602,755.30 547,045,230.16

• B. Information about major debtors:

Major debtors Ending balance HuaXia Film Distribution Co., Ltd. (華夏電影發行有限責任公司) 181,074,339.48 Leshi Zhixin Electronic Technology (Tianjin) Limited 31,272,999.64 (樂視致新電子科技（天津）有限公司) China Film Digital Movie Development (Beijing) Co., 88,774,184.01 Ltd.(中影數字電影發展（北京）有限公司)

Ending balance

1. Prepayments

Opening balance Ending balance Prepayments 194,739,782.74 206,965,219.78 Total 194,739,782.74 206,965,219.78

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FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

• B. Information about major debtors:

Major debtors	Ending balance
Beijing Jizhi Image Film & Television Culture Co., Ltd.	52,400,000.00
(北京集智映像影視文化有限公司)
Film Workshop Company Limited	37,780,000.00
Shanghai Sangeyi Film & Television Culture Media Co., Ltd.	34,720,238.79
(上海叁個壹影視文化傳媒有限公司)

1. Interest receivables

Opening balance Interest receivables 2,086,671.23 Total 2,086,671.23 Other receivables Opening balance Other accounts receivable 1,852,390,268.78 Total 1,852,390,268.78	Ending balance 2,086,671.23 2,086,671.23 Ending balance 1,774,781,101.71
	1,774,781,101.71

1. Other receivables

2. B. Information about major debtors:

Major debtors	Ending balance
Legendary East Investment Consulting (Beijing) Co., Ltd.
(傳奇東方投資諮詢（北京）有限公司)	20,227,500.00
LIONS GATE CHINA (UK) LIMITED	17,966,465.75
Leshi Holding (Beijing) Co., Ltd.*(樂視控股（北京）有限公司)	1,707,735,445.50

1. Inventories

Category Opening balance Ending balance Inventories 510,862,951.00 622,181,101.63 Total 510,862,951.00 622,181,101.63

— 637 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

7. Other current assets Category Opening balance Ending balance Other current assets 1,727,886.33 2,812,706.24 Total 1,727,886.33 2,812,706.24 8. Long-term equity investments Investee Opening balance Ending balance Beijing Lexiangdangran Film & Television Investment Co., Ltd. (北京樂響當然影視投資有限公司) 2,415,078.85 2,415,078.85 Jiangsu Original Force Animation Co., Ltd. (江蘇原力電腦動畫製作有限公司) 100,762,287.50 100,762,287.50 Total 103,177,366.35 103,177,366.35 9. Fixed assets and accumulated depreciation A. Original value of fixed assets Category Opening balance Increase in the period Decrease in the period Ending balance Fixed assets 2,525,057.25 3,624.58 2,521,432.67 Total 2,525,057.25 3,624.58 2,521,432.67 B. Accumulated depreciation Category Opening balance Increase in the period Decrease in the period Ending balance Accumulated depreciation 909,716.24 87,829.04 131,879.31 865,665.97 Total 909,716.24 87,829.04 131,879.31 865,665.97	7. Other current assets Category Opening balance Ending balance Other current assets 1,727,886.33 2,812,706.24 Total 1,727,886.33 2,812,706.24 8. Long-term equity investments Investee Opening balance Ending balance Beijing Lexiangdangran Film & Television Investment Co., Ltd. (北京樂響當然影視投資有限公司) 2,415,078.85 2,415,078.85 Jiangsu Original Force Animation Co., Ltd. (江蘇原力電腦動畫製作有限公司) 100,762,287.50 100,762,287.50 Total 103,177,366.35 103,177,366.35 9. Fixed assets and accumulated depreciation A. Original value of fixed assets Category Opening balance Increase in the period Decrease in the period Ending balance Fixed assets 2,525,057.25 3,624.58 2,521,432.67 Total 2,525,057.25 3,624.58 2,521,432.67 B. Accumulated depreciation Category Opening balance Increase in the period Decrease in the period Ending balance Accumulated depreciation 909,716.24 87,829.04 131,879.31 865,665.97 Total 909,716.24 87,829.04 131,879.31 865,665.97	7. Other current assets Category Opening balance Ending balance Other current assets 1,727,886.33 2,812,706.24 Total 1,727,886.33 2,812,706.24 8. Long-term equity investments Investee Opening balance Ending balance Beijing Lexiangdangran Film & Television Investment Co., Ltd. (北京樂響當然影視投資有限公司) 2,415,078.85 2,415,078.85 Jiangsu Original Force Animation Co., Ltd. (江蘇原力電腦動畫製作有限公司) 100,762,287.50 100,762,287.50 Total 103,177,366.35 103,177,366.35 9. Fixed assets and accumulated depreciation A. Original value of fixed assets Category Opening balance Increase in the period Decrease in the period Ending balance Fixed assets 2,525,057.25 3,624.58 2,521,432.67 Total 2,525,057.25 3,624.58 2,521,432.67 B. Accumulated depreciation Category Opening balance Increase in the period Decrease in the period Ending balance Accumulated depreciation 909,716.24 87,829.04 131,879.31 865,665.97 Total 909,716.24 87,829.04 131,879.31 865,665.97	7. Other current assets Category Opening balance Ending balance Other current assets 1,727,886.33 2,812,706.24 Total 1,727,886.33 2,812,706.24 8. Long-term equity investments Investee Opening balance Ending balance Beijing Lexiangdangran Film & Television Investment Co., Ltd. (北京樂響當然影視投資有限公司) 2,415,078.85 2,415,078.85 Jiangsu Original Force Animation Co., Ltd. (江蘇原力電腦動畫製作有限公司) 100,762,287.50 100,762,287.50 Total 103,177,366.35 103,177,366.35 9. Fixed assets and accumulated depreciation A. Original value of fixed assets Category Opening balance Increase in the period Decrease in the period Ending balance Fixed assets 2,525,057.25 3,624.58 2,521,432.67 Total 2,525,057.25 3,624.58 2,521,432.67 B. Accumulated depreciation Category Opening balance Increase in the period Decrease in the period Ending balance Accumulated depreciation 909,716.24 87,829.04 131,879.31 865,665.97 Total 909,716.24 87,829.04 131,879.31 865,665.97	7. Other current assets Category Opening balance Ending balance Other current assets 1,727,886.33 2,812,706.24 Total 1,727,886.33 2,812,706.24 8. Long-term equity investments Investee Opening balance Ending balance Beijing Lexiangdangran Film & Television Investment Co., Ltd. (北京樂響當然影視投資有限公司) 2,415,078.85 2,415,078.85 Jiangsu Original Force Animation Co., Ltd. (江蘇原力電腦動畫製作有限公司) 100,762,287.50 100,762,287.50 Total 103,177,366.35 103,177,366.35 9. Fixed assets and accumulated depreciation A. Original value of fixed assets Category Opening balance Increase in the period Decrease in the period Ending balance Fixed assets 2,525,057.25 3,624.58 2,521,432.67 Total 2,525,057.25 3,624.58 2,521,432.67 B. Accumulated depreciation Category Opening balance Increase in the period Decrease in the period Ending balance Accumulated depreciation 909,716.24 87,829.04 131,879.31 865,665.97 Total 909,716.24 87,829.04 131,879.31 865,665.97
		103,177,366.35
			Ending balance 2,521,432.67
			2,521,432.67
				Ending balance 865,665.97
	131,879.31			865,665.97

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FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

• C. Net value of fixed assets

Category	Opening balance	Ending balance
Net value of fixed assets	1,615,341.01	1,655,766.70
Total	1,615,341.01	1,655,766.70

• D. Provision for impairment of the fixed asset:

As reviewed by the management of the Company, there is no impairment evidence for fixed asset, therefore, no provision is provided for the impairment of the fixed asset.

1. Deferred income tax assets

Category				Opening balance	Ending balance
Deferred	income	tax	assets	3,397,183.23	3,397,183.23
Total				3,397,183.23	3,397,183.23

11. Other non-current assets

Category	Opening balance	Ending balance
Rights to contract with famous directors	119,127,953.18	120,322,127.94
Total	119,127,953.18	120,322,127.94

— 639 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

12.	Short-term loans
	Category	Opening balance	Ending balance
	Short-term loans	163,742,000.00	99,900,000.00
	Total	163,742,000.00	99,900,000.00
13.	Trade payables
		Opening balance	Ending balance
	Trade payables	330,892,976.80	443,903,853.22
	Total	330,892,976.80	443,903,853.22

B. Information about major creditors: Major creditors Ending balance Shenzhen Huaqiang Digital Cartoon Co., Ltd. (深圳華強數字動漫有限公司) 73,153,509.27 Youyang (Tianjin) Cartoon Culture Communication Co., Ltd. (優揚（天津）動漫文化傳媒有限公司) 50,057,712.37 Beijing Galloping Horse Film & TV Production (北京小馬奔騰影業有限公司) 54,444,089.71

1. Advance payments

		Opening balance	Ending balance
Advance	payments	239,786,537.05	420,296,849.22
Total		239,786,537.05	420,296,849.22

— 640 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

• B. Information about major creditors:

	Major creditors		Ending balance
	Khorgos Leshi New Generation Culture Media Co., Ltd.		246,600,000.00
	Village roadshow pictures asia lte		58,813,000.00
	LE CORPORTAION LIMITED		27,500,000.00
15.	Payroll payable
	Category	Opening balance	Ending balance
	Payroll payable	7,274,501.08	3,649,020.36
	Total	7,274,501.08	3,649,020.36
16.	Taxes payable
	Category	Opening balance	Ending balance
	Taxes payable	32,124,260.74	13,714,611.83
	Total	32,124,260.74	13,714,611.83
17.	Interest payable
	Category	Opening balance	Ending balance
	Interest payable	5,375,626.19	4,807,476.45
	Total	5,375,626.19	4,807,476.45

— 641 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

18. Other payables

Opening balance Ending balance Other trade payables 16,516,157.83 39,295,335.62 Total 16,516,157.83 39,295,335.62

• B. Information about major creditors:

Major creditors Ending balance LeTV Information Technology (Tianjin) Co., Ltd. 15,666,500.00 Beijing Hongcheng Xintai Real Estate Co., Ltd. 6,608,744.99

1. Non-current liabilities due within one year

Opening balance Ending balance

Long-term loans due within one year 44,367,245.00 44,367,245.00 Bonds payable due within one year 298,797,867.62 269,838,559.3 Total 343,165,112.62 314,205,804.32

1. Paid-in capitals

Shareholders Opening balance Ending balance Share capitals 836,792,444.00 836,792,444.00 Total 836,792,444.00 836,792,444.00

— 642 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

21. Capital reserves Item Opening balance Capital reserves 2,283,565,643.22 Total 2,283,565,643.22 22. Surplus reserves Item Opening balance Surplus reserves 184,738.38 Total 184,738.38 23. Undistributed profits Item Opening balance Undistributed profits -861,067,962.13 Total -861,067,962.13 Note: For details of share-based payment, please refer to Note IX of this section.	Ending balance 2,283,565,643.22	Ending balance 2,283,565,643.22
	2,283,565,643.22
		Ending balance 184,738.38 184,738.38 Ending balance -828,290,217.81
		-828,290,217.81

24.	Other comprehensive incomes
	Item	Opening balance	Ending balance
	Translation difference of the foreign currency
	statements	-812,075.86	-973,801.08
	Total	-812,075.86	-973,801.08

— 643 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

• (II) The Company’s operating results of 2016:

• Business incomes

Item		Balance of the year
Business	incomes	93,356,417.43
Total		93,356,417.43

1. Operating costs

Item	Balance of the year
Operating costs	20,186,768.09
Total	20,186,768.09
Business taxes and surcharges
Item	Balance of the year
Business taxes and surcharges	687,179.92
Total	687,179.92

1. Business taxes and surcharges

2. Selling expenses

Item		Balance of the year
Selling	expenses	14,074,657.59
Total		14,074,657.59

— 644 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

1. Management fees

Item		Balance of the year
Management	fees	16,389,169.19
Total		16,389,169.19

1. Financial expenses Item Balance of the year Financial expenses 7,179,189.45 Total 7,179,189.45

2. Non-operating incomes Item Balance of the year Non-operating incomes 112,186.45 Total 112,186.45

8. Non-operating expenses Item Balance Non-operating expenses Total	of the year 630,264.43
	630,264.43

— 645 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

9. Income tax expenses

Item			Balance of the year
Income	tax	expenses	1,558,866.47
Total			1,558,866.47

IX. Share-based payment

1. Overall condition of share-based payment

	Amount	Amount	Amount
Item	in 2016	in 2015	in 2014
Total equity instruments granted	77,941,800.00	221,079,600.00	955,084,940.22
by the Company in the current
period
Total exercised equity	77,941,800.00	221,079,600.00	955,084,940.22
instruments of the Company in
current period
Total invalid equity instruments	—		—
of the Company in current
period
Range of exercise price of the	—		—
Company’s outstanding shares
option at the end of the period
and the remaining period of the
contract
Range of exercise price of the	—		—
Company’s other equity
instruments at the end of the
period and the remaining
period of the contract

1. Condition of equity-settled share-based payment

	Amount		Amount	Amount
Item	in 2016		in 2015	in 2014
Measures for the confirmation of	Capital increase and	transfer of fair value by shareholders in
the fair value of the equity	recent period
instruments on the grant date
Basis for determining the number	Allotment number	of	incentive shares approved by the
of the vested equity	Board of the Company
instruments
Reasons for any significant
difference between the estimate
in current period and that in
previous period
Accumulative amount of	1,254,106,340.22	1,176,164,540.22		955,084,940.22
equity-settled share-based
payment included in capital
reserve
Total expenses of equity-settled	77,941,800.00		221,079,600.00	955,084,940.22
share-based payment
recognized in current period

— 646 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

X. Other Important Events

As at the publication date of this report, there is no other important event occurred in the Company.

Le Vision Pictures (Beijing) Co., Ltd. 31 March 2017

— 647 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

C. DIFFERENCES BETWEEN ACCOUNTING POLICIES ADOPTED BY THE COMPANY (HKFRS) AND LESHI PICTURES (CAS)

As described in the section entitled “Letter from the Board” of this circular, the Company has applied to the Stock Exchange for, and has been granted, a waiver from the requirement to include in this circular an accountants’ report on Leshi Pictures and its consolidated subsidiaries (collectively referred to as the “ Leshi Pictures Group ”) in accordance with Rule 14.67(6)(a)(i) and Chapter 4 of the Listing Rules.

Instead, the circular contains a copy of the:

Financial statements of Leshi Pictures Group for the financial year ended 31 December 2016, prepared in accordance with CAS and audited by Beijing Puhongde CPA Co., Ltd. (general partnership), and three months ended 31 March 2017, prepared in accordance with CAS and reviewed by Beijing Puhongde CPA Co., Ltd. (general partnership), (collectively referred to the “ Leshi Pictures Historical Track Record Accounts ”) as set out in Appendix IV to this circular (the “ Leshi Pictures’ Financial Information ”).

The Leshi Pictures Historical Track Record Accounts cover the financial positions of Leshi Pictures as at 31 December 2016 and three months ended 31 March 2017 and the results of the Leshi Pictures for the year ended 31 December 2016 and three months ended 31 March 2017 (the “ Relevant Periods ”).

In particular, disclosure is set out providing:

• a) a comparison between Leshi Pictures Group’s consolidated statements of profit or loss as extracted from the Leshi Pictures’ Financial Information on the one hand (prepared in accordance with CAS), and a restatement of such consolidated statements of profit or loss and other comprehensive income had they instead been prepared in accordance with accounting policies presently adopted by the Company which are in compliance with HKFRS. The process applied in the preparation of such restatement is set out below;

• b) a comparison between Leshi Pictures Group’s consolidated statements of financial position as extracted from the Leshi Pictures’ Financial Information on the one hand (prepared in accordance with CAS), and a restatement of such consolidated statements of financial position had they instead been prepared in accordance with accounting policies presently adopted by the Company which are in compliance with HKFRS. The process applied in the preparation of such restatement is set out below; and

• c) a discussion of the material financial statements line item differences arising out of the restatement exercise outlined in (a) and (b) above.

— 648 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

• (the reconciliation for the Leshi Pictures Historical Track Record Accounts is referred to as the “ Reconciliation Information ”)

Basis of Preparation

The Reconciliation Information as at and for the Relevant Periods restates the “Unadjusted Financial Information under CAS” of Leshi Pictures as if it had been prepared in accordance with the accounting policies presently adopted by the Company which are in compliance with HKFRS.

Reconciliation Process

The Reconciliation Information has been prepared by the directors of the Company by comparing the differences between the accounting policies adopted by Leshi Pictures for the Relevant Periods which are prepared in accordance with CAS, and the accounting policies presently adopted by the Company which are in compliance with HKFRS, and quantifying the relevant material financial effects of such differences, if any.

Your attention is drawn to the fact that the Reconciliation Information has not been subject to an independent audit. Accordingly, no opinion is expressed by an auditor on whether it presents a true and fair view of Leshi Pictures Group’s financial positions as at 31 December 2016 and three months ended 31 March 2017, nor its results for each of the Relevant Periods then ended under the accounting policies presently adopted by the Company. Your attention is also drawn to the fact that the unaudited financial information does not constitute the first set of financial statements of the Leshi Pictures prepared in accordance with HKFRS.

SHINEWING (HK) CPA Limited (“ SHINEWING Hong Kong ”) was engaged by the Company to conduct work in accordance with the Hong Kong Standard on Assurance Engagements 3000 (Revised) “Assurance Engagements Other Than Audits or Reviews of Historical Financial Information” (“ HKSAE 3000 (Revised) ”) issued by the HKICPA on the Reconciliation Information. The work consisted primarily of:

• (i) comparing the unadjusted financial information of the Leshi Pictures Group set out in the column “Unadjusted Financial Information under CAS” of the Reconciliation Information with the Leshi Pictures Historical Track Record Accounts prepared under CAS as set out in the Leshi Pictures Historical Track Record Accounts that has been included in the appendix IV to the Circular;

• (ii) considering the adjustments made and evidence supporting the adjustments made in arriving at the “Adjusted Financial Information under the Company’s policies” also set out in the Reconciliation Information, which included examining the differences between the Leshi Pictures Group’s accounting policies and the Company’s accounting policies; and

• (iii) checking the arithmetic accuracy of the computation of the restated amounts set out in the column “Adjusted Financial Information under the Company’s policies” of the reconciliation information.

— 649 —

APPENDIX IV FINANCIAL INFORMATION OF LESHI PICTURES

SHINEWING Hong Kong’s engagement did not involve independent examination of any of the underlying financial information. The work carried out in accordance with HKSAE 3000 (Revised) is different in scope from an audit or review conducted in accordance with Hong Kong Standards on Auditing or Hong Kong Standards on Review Engagements issued by the HKICPA and consequently, SHINEWING Hong Kong did not express an audit opinion nor a review conclusion on the Reconciliation Information. SHINEWING Hong Kong’s engagement was intended solely for the use of the directors of the Company in connection with this circular and may not be suitable for another purpose. Based on the work performed, SHINEWING Hong Kong has concluded that:

• (i) the “Unadjusted Financial Information under CAS” as set out in the Reconciliation Information has been properly extracted from the Leshi Pictures’ Financial Information;

• (ii) the adjustments reflect, in all material respects, the differences between the Leshi Pictures Group’s accounting policies and the Company’s accounting policies; and

• (iii) the computation of the “Adjusted Financial Information under the Company’s policies” is arithmetically accurate.

— 650 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

Unaudited Adjusted Consolidated Statements of Profit or Loss under the Company’s Policies

		For the year ended	For the year ended	For the year ended	**For the three months **	**For the three months **	**For the three months **	ended
		**31 December **		2016		31 March 2017
				Adjusted				Adjusted
				Financial				Financial
		Unadjusted		Information	Unadjusted		Information
		Financial		under the	Financial		under the
		Information		Company’s	Information		Company’s
		under CAS	Adjustments	policies	under CAS	Adjustments		policies
		(audited)	(unaudited)	(unaudited)	(audited)	(unaudited)	(unaudited)
	Notes	RMB’000	RMB’000	RMB’000	RMB’000	RMB’000		RMB’000
Revenue		1,098,268		1,098,268	93,356			93,356
Cost of sales		(574,379)		(574,379)	(20,874)			(20,874)
Gross profit		523,889		523,889	72,482			72,482
Other income and gains	a,b	31,855	51,248	83,103	112	99		211
Selling expenses		(204,496)		(204,496)	(14,075)			(14,075)
Administrative expenses	b	(185,565)	(158)	(185,723)	(17,019)	(202)		(17,221)
Finance costs	b	16,757	(50,441)	(33,684)	(7,179)	103		(7,076)
Share of loss of an associate	a	—	(649)	(649)	—			—
Profit before tax		182,440		182,440	34,321			34,321
Income tax expenses		(36,915)		(36,915)	(1,559)			(1,559)
Profit and total comprehensive
income for the year/period		145,525		145,525	32,762			32,762
Profit and total comprehensive
income for the year/period
attributable to:
Owners of the Company		145,437		145,437	32,777			32,777
Non-controlling interests		88		88	(15)			(15)
Total comprehensive income
for the year/period		145,525		145,525	32,762			32,762

— 651 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

Unaudited Adjusted Consolidated Balance sheets under the Company’s Policies

		**As at **	**31 December **	2016		As at 31 March 2017	As at 31 March 2017	As at 31 March 2017
				Adjusted					Adjusted
				Financial					Financial
		Unadjusted		Information		Unadjusted		Information
		Financial		under the		Financial		under the
		Information		Company’s		Information		Company’s
		under CAS	Adjustments		policies	under CAS	Adjustments		policies
		(audited)	(unaudited)	(unaudited)		(audited)	(unaudited)	(unaudited)
	Notes	RMB’000	RMB’000	RMB’000		RMB’000	RMB’000		RMB’000
Non-current assets
Property, plant and equipment		1,616			1,616	1,656			1,656
Investment in an associate		2,415			2,415	2,415			2,415
Available-for-sale financial
asset		100,762			100,762	100,762			100,762
Deferred tax assets		3,397			3,397	3,397			3,397
Other non-current assets		119,128			119,128	120,322			120,322
		227,318			227,318	228,552			228,552
Current assets
Inventories		510,863			510,863	622,181			622,181
Trade and bills receivables		415,603			415,603	547,046			547,046
Deposits, prepayments and
other receivables	c, d	2,049,217	(1,780,765)		268,452	1,983,833	(1,704,839)		278,994
Income tax recoverable	c	—			—	—	3,277		3,277
Amount due from holding
company	d	—	1,782,602	1,782,602		—	1,707,735		1,707,735
Other current assets	c	1,728	(1,728)		—	2,813	(2,813)		—
Cash and cash equivalents		193,192			193,192	246,993			246,993
		3,170,603		3,170,712		3,402,866			3,406,226
Current liabilities
Trade and bills payables		330,893			330,893	443,904			443,904
Accrual and other payables	c	268,953	16,220		285,173	468,049	17,075		485,124
Income tax payable	c	32,124	(16,111)		16,013	13,715	(13,715)		—
Bank borrowings		163,742			163,742	99,900			99,900
Other current liabilities		343,165			343,165	314,206			314,206
		1,138,877		1,138,986		1,339,774			1,343,134
Net current assets		2,031,726		2,031,726		2,063,092			2,063,092
Total assets less current
liabilities		2,259,044		2,259,044		2,291,644			2,291,644

— 652 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

	**As at 31 December **	**As at 31 December **	2016	**As at **	**As at **	31 March 2017	31 March 2017
			Adjusted					Adjusted
			Financial					Financial
	Unadjusted		Information	Unadjusted			Information
	Financial		under the	Financial			under the
	Information		Company’s	Information			Company’s
	under CAS	Adjustments	policies	under CAS	Adjustments			policies
	(audited)	(unaudited)	(unaudited)	(audited)		(unaudited)	(unaudited)
	RMB’000	RMB’000	RMB’000	RMB’000		RMB’000		RMB’000
Equity
Share capital	836,792		836,792	836,792				836,792
Share premium	2,283,566		2,283,566	2,283,566				2,283,566
Statutory reserves	185		185	185				185
Other comprehensive income	(812)		(812)	(974)				(974)
Retained profits	(861,068)		(861,068)	(828,290)				(828,290)
	2,258,663		2,258,663	2,291,279				2,291,279
Non-controlling interests	381		381	365				365
	2,259,044		2,259,044	2,291,644				2,291,644

Note 1: Reclassification of accounts

Under Leshi Pictures’ CAS accounting policies, Leshi Pictures has presented several items which are different in regard to the presentation or classification under the Company’s HKFRS accounting policies. The details are as follows:

a) Share of result of an associate

Under Leshi Pictures’ CAS accounting policies, Leshi Pictures has presented the share of result of an associate in “Other income and gains”. According to HKFRS 1:82(c), the entity shall present the amount of share of result of an associate as a separate line item in the consolidated statement of profit or loss and other comprehensive income.

Had Leshi Pictures adopted the Company’s accounting policy, the impact of the adjustments on profit or loss for the year ended 31 December 2016 and three months ended 31 March 2017 would have been as follows:

	For the year ended	For the three months
RMB’000	31 December 2016	ended 31 March 2017
	Unaudited	Unaudited
	Dr/(Cr)	Dr/(Cr)
Other income and gain	(649)	—
Share of loss of an associate	649	—

— 653 —

FINANCIAL INFORMATION OF LESHI PICTURES

APPENDIX IV

b) Finance costs and other finance charges

Under Leshi Pictures’ CAS accounting policies, Leshi Pictures has presented the bank charges and net exchange gain (loss) and bank interest income in “Finance costs”. According to HKAS 18:35(b)(iii), the entity shall present the amount of interest income from bank deposits in a significant category of revenue. [According to HKFRS 7:20], bank charges and net exchange gain (loss) did not fall into the scope of the definition of finance costs, and shall be presented as an expenses other than “finance costs”.

Had Leshi Pictures adopted the Company’s accounting policy, the impact of the adjustments on profit or loss for the year ended 31 December 2016 and three months ended 31 March 2017 would have been as follows:

	**For **	the year ended	For the three months
RMB’000	31 December 2016		ended 31 March 2017
		Unaudited	Unaudited
		Dr/(Cr)	Dr/(Cr)
Other income and gains		(50,599)	(99)
Administrative expenses		158	202
Finance costs		50,441	(103)

• c) Income tax payables

Under Leshi Pictures’ CAS accounting policies, Leshi Pictures has presented the current tax payables and other domestic tax payables or levies in “Income tax payables”. According to HKAS 12:5, current tax is the amount of income tax payables in respect of the taxable profit for a period. According to HKAS 1:54(n), the entity shall present liabilities for current tax as defined in HKAS 12 Income tax in the consolidated statement of financial position. Since other domestic tax payables or levies are not arisen from the taxable profit, such liabilities shall not be presented in “Income tax payables”.

Had Leshi Pictures adopted the Company’s accounting policy, the impact of the adjustments on the carrying amount of assets as at 31 December 2016 and 31 March 2017 would have been as follows:

	As at	As at
RMB’000	31 December 2016	31 March 2017
	Unaudited	Unaudited
	Dr/(Cr)	Dr/(Cr)
Income tax payable	16,111	13,715
Income tax recoverable	—	3,277
Other payables	(16,220)	(17,075)
Other receivables	1,837	2,896
Other current assets (note)	(1,728)	(2,813)

Note: Included in other current assets represented the Valued-added tax recoverable.

— 654 —

APPENDIX IV

FINANCIAL INFORMATION OF LESHI PICTURES

d) Amount due from holding company

Under Leshi Pictures’ CAS accounting policies, Leshi Pictures has presented the amount due from holding company in “Other receivables”. According to HKAS 24:18(b), the entity shall disclose the outstanding balance regarding to the related party transactions. According to HKAS 1:55, the entity shall present an additional line items in the consolidated statement of financial position when such presentation is relevant to an understanding of the entity’s financial position.

Had Leshi Pictures adopted the Company’s accounting policy, the impact of the adjustments on the carrying amount of assets as at 31 December 2016 and 31 March 2017 would have been as follows:

	As at	As at
RMB’000	31 December 2016	31 March 2017
	Unaudited	Unaudited
	Dr/(Cr)	Dr/(Cr)
Amount due from holding company	1,782,602	1,707,735
Other receivables	(1,782,602)	(1,707,735)

— 655 —

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is an illustrative and unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group as at 31 December 2016 (the “ Unaudited Pro Forma Financial Information ”) which has been prepared based on the basis of the notes set out below for the purpose of illustrating the effect of the acquisitions of the relevant equity interests of Leshi Zhixin Electronic Technology (Tianjin) Limited (“ Leshi Zhixin ”), Leshi Internet Information & Technology Corp (Beijing) (“ Leshi Internet ”) and Le Vision Pictures (Beijing) Co. Ltd. (“ Leshi Pictures ”) (together, the “ Target Companies ”) (the “ Transaction ”), as if the Transaction had been taken place on 31 December 2016. This pro forma financial information has been prepared for illustrative purposes only and because of its hypothetical nature, it may not give a true picture of the financial position of the Group had the Transaction been completed as at 31 December 2016 or at any future date.

The Unaudited Pro Forma Financial Information of the Enlarged Group should be read in conjunction with other financial information included elsewhere in this circular.

— 656 —

APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

UNAUDITED PRO FORMA CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES OF THE ENLARGED GROUP

Audited Consolidated statement of assets and liabilities of the Group as at 31 December 2016 (Note 1) RMB ’000 Assets Non-current assets Property, plant and equipment 546,526 Investment properties 656,046 Intangible assets 421,353 Investments accounted for using the equity method 34,552,860 Prepayments 1,657,285 Deferred income tax assets 2,385,982 Available-for-sale financial assets 160,000 Derivative financial instruments 105,359 40,485,411 Current assets Properties under development 106,962,516 Completed properties held for sale 23,658,662 Trade and other receivables 8,416,425 Amounts due from related companies 37,919,092 Prepayments 5,928,319 Restricted cash 17,726,623 Cash and cash equivalents 52,086,050 252,697,687 Total assets 293,183,098 Liabilities Non-current liabilities Borrowings 80,199,682 Derivative financial instruments 187,776 Deferred income tax liabilities 8,790,371 89,177,829 Current liabilities Trade and other payables 41,413,335 Advanced proceeds from customers 34,376,367 Amounts due to related companies 51,671,111 Current income tax liabilities 8,488,966 Borrowings 32,644,337 168,594,116 Total liabilities 257,771,945 Net assets 35,411,153	Audited Consolidated statement of assets and liabilities of the Group as at 31 December 2016 (Note 1) RMB ’000 Assets Non-current assets Property, plant and equipment 546,526 Investment properties 656,046 Intangible assets 421,353 Investments accounted for using the equity method 34,552,860 Prepayments 1,657,285 Deferred income tax assets 2,385,982 Available-for-sale financial assets 160,000 Derivative financial instruments 105,359 40,485,411 Current assets Properties under development 106,962,516 Completed properties held for sale 23,658,662 Trade and other receivables 8,416,425 Amounts due from related companies 37,919,092 Prepayments 5,928,319 Restricted cash 17,726,623 Cash and cash equivalents 52,086,050 252,697,687 Total assets 293,183,098 Liabilities Non-current liabilities Borrowings 80,199,682 Derivative financial instruments 187,776 Deferred income tax liabilities 8,790,371 89,177,829 Current liabilities Trade and other payables 41,413,335 Advanced proceeds from customers 34,376,367 Amounts due to related companies 51,671,111 Current income tax liabilities 8,488,966 Borrowings 32,644,337 168,594,116 Total liabilities 257,771,945 Net assets 35,411,153	Pro forma adjustments Unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group as at 31 December 2016 (Note 2) (Note 3) RMB ’000 RMB ’000 RMB ’000 — — 546,526 — — 656,046 — — 421,353 15,041,466 1,610 49,595,936 — — 1,657,285 — — 2,385,982 — — 160,000 — — 105,359 15,041,466 1,610 55,528,487 — — 106,962,516 — — 23,658,662 — — 8,416,425 — — 37,919,092 — — 5,928,319 — — 17,726,623 (15,041,466) (1,610) 37,042,974 (15,041,466) (1,610) 237,654,611 — — 293,183,098 — — 80,199,682 — — 187,776 — — 8,790,371 — — 89,177,829 — — 41,413,335 — — 34,376,367 — — 51,671,111 — — 8,488,966 — — 32,644,337 — — 168,594,116 — — 257,771,945 — — 35,411,153	Pro forma adjustments Unaudited pro forma consolidated statement of assets and liabilities of the Enlarged Group as at 31 December 2016 (Note 2) (Note 3) RMB ’000 RMB ’000 RMB ’000 — — 546,526 — — 656,046 — — 421,353 15,041,466 1,610 49,595,936 — — 1,657,285 — — 2,385,982 — — 160,000 — — 105,359 15,041,466 1,610 55,528,487 — — 106,962,516 — — 23,658,662 — — 8,416,425 — — 37,919,092 — — 5,928,319 — — 17,726,623 (15,041,466) (1,610) 37,042,974 (15,041,466) (1,610) 237,654,611 — — 293,183,098 — — 80,199,682 — — 187,776 — — 8,790,371 — — 89,177,829 — — 41,413,335 — — 34,376,367 — — 51,671,111 — — 8,488,966 — — 32,644,337 — — 168,594,116 — — 257,771,945 — — 35,411,153
	40,485,411		55,528,487
	106,962,516 23,658,662 8,416,425 37,919,092 5,928,319 17,726,623 52,086,050		106,962,516 23,658,662 8,416,425 37,919,092 5,928,319 17,726,623 37,042,974
	252,697,687		237,654,611
	293,183,098		293,183,098
	80,199,682 187,776 8,790,371		80,199,682 187,776 8,790,371
	89,177,829		89,177,829
	41,413,335 34,376,367 51,671,111 8,488,966 32,644,337		41,413,335 34,376,367 51,671,111 8,488,966 32,644,337
	168,594,116		168,594,116
	257,771,945		257,771,945
	35,411,153		35,411,153

— 657 —

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Notes to the Unaudited Pro Forma Financial Information of the Enlarged Group:

1. The balances are extracted from the audited consolidated balance sheet of the Company as at 31 December 2016 as set out in the Company’s published annual report for the year ended 31 December 2016.

2. On 13 January 2017, the Company entered into acquisition agreements to acquire 8.61% equity interest in Leshi Internet at the consideration of RMB6,041 million, 15% equity interest in Leshi Pictures at the consideration of RMB1,050 million and 33.4959% equity interest in Leshi Zhixin at the consideration of RMB7,950 million. The total consideration of the Transaction was RMB15,041 million. Upon the completion of the Transaction, each of the Target Companies has become an associate of the Company, and is accounted for in the consolidated financial statements of the Group using equity method under HKAS 28 “Investments in Associates and Joint Ventures”.

The equity method is a method of accounting whereby the investment is initially recognised at cost and adjusted thereafter for the post-acquisition change in the investor’s share of the investee’s net assets. For the purpose of this unaudited pro forma financial information, the investment is recorded at RMB15,041 million, being the total consideration paid by the Company, which is not directly related to the financial information of the Target Companies as presented in appendices II and IV to this circular.

The Group will estimate its share of the net fair value of the identifiable assets and liabilities of the Target Companies as of the date of completion. The excess of the consideration over the Group’s share of the fair value of the Target Companies’ net assets will be accounted for as goodwill and will be recorded in the carrying value of the investment in the Target Companies. The estimated fair values of the identifiable assets and liabilities of the Target Companies may be different from the financial information of the Target Companies as presented in appendices II and IV.

1. This represents the estimated transaction cost, such as professional fees, of approximately RMB1.61 million incurred which are directly attributable to the Transaction.

2. After the completion of Transaction, there were a number of new developments relating to the Target Companies’ operations and the founder of Leshi Holding (Beijing) Co, Ltd., which may affect the short-term value of the Group’s investments. The Group will continue to monitor the situation and assess if there is any negative impact on the Group’s financial position. The Group will apply consistent accounting policies and assumptions to assess impairment in subsequent reporting periods in accordance with the relevant accounting standards. For the six months ended 30 June 2017, the Group carried out impairment assessment on the investments and expected impairment provision of the investments in Leshi Internet and Leshi Zhixin will be made. The Directors consider that the recognition of such investment loss and impairment provision are affected mainly by short-term investment value of the Target Companies. Such provision is not reflected in this unaudited pro forma financial information.

3. No adjustment has been made to the Unaudited Pro Forma Financial Information of the Group to reflect any trading results or other transactions of the Group and the Target Companies entered subsequent to 31 December 2016, including the new developments of the Target Companies.

— 658 —

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

The following is the text of a report received from PricewaterhouseCoopers, Certified Public Accountants, Hong Kong, for the purpose of incorporation in this circular.

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INDEPENDENT REPORTING ACCOUNTANT’S ASSURANCE REPORT ON THE COMPILATION OF UNAUDITED PRO FORMA FINANCIAL INFORMATION

To the Directors of Sunac China Holdings Limited

We have completed our assurance engagement to report on the compilation of unaudited pro forma financial information of Sunac China Holdings Limited (the “Company”) and its subsidiaries (collectively the “Group”), and Leshi Internet Information & Technology Corp (Beijing), Leshi Zhixin Electronic Technology (Tianjin) Limited and Le Vision Pictures (Beijing) Co. Ltd. (collectively the “Target Companies”) by the directors for illustrative purposes only. The unaudited pro forma financial information consists of the unaudited pro forma consolidated statement of assets and liabilities as at 31 December 2016, and related notes (the “Unaudited Pro Forma Financial Information”) as set out on pages 656 to 658 of the Company’s circular dated 31 August 2017, in connection with the acquisition of the relevant equity interests of Target Companies (the “Transaction”). The applicable criteria on the basis of which the directors have compiled the Unaudited Pro Forma Financial Information are described on pages 656 to 658.

The Unaudited Pro Forma Financial Information has been compiled by the directors to illustrate the impact of the Transactions on the Group’s financial position as at 31 December 2016 as if the Transactions had taken place at 31 December 2016. As part of this process, information about the Group’s financial position has been extracted by the directors from the Group’s financial statements for the year ended 31 December 2016, on which an audit report has been published.

Directors’ Responsibility for the Unaudited Pro Forma Financial Information

The directors are responsible for compiling the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited (the “Listing Rules”) and with reference to Accounting Guideline 7 Preparation of Pro Forma Financial Information for Inclusion in Investment Circulars (“AG 7”) issued by the Hong Kong Institute of Certified Public Accountants (“HKICPA”).

— 659 —

APPENDIX V

UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

Our Independence and Quality Control

We have complied with the independence and other ethical requirements of the Code of Ethics for Professional Accountants issued by the HKICPA, which is founded on fundamental principles of integrity, objectivity, professional competence and due care, confidentiality and professional behaviour.

Our firm applies Hong Kong Standard on Quality Control 1 issued by the HKICPA and accordingly maintains a comprehensive system of quality control including documented policies and procedures regarding compliance with ethical requirements, professional standards and applicable legal and regulatory requirements.

Reporting Accountant’s Responsibilities

Our responsibility is to express an opinion, as required by paragraph 4.29(7) of the Listing Rules, on the Unaudited Pro Forma Financial Information and to report our opinion to you. We do not accept any responsibility for any reports previously given by us on any financial information used in the compilation of the Unaudited Pro Forma Financial Information beyond that owed to those to whom those reports were addressed by us at the dates of their issue.

We conducted our engagement in accordance with Hong Kong Standard on Assurance Engagements 3420, “Assurance Engagements to Report on the Compilation of Pro Forma Financial Information Included in a Prospectus”, issued by the HKICPA. This standard requires that the reporting accountant plans and performs procedures to obtain reasonable assurance about whether the directors have compiled the Unaudited Pro Forma Financial Information in accordance with paragraph 4.29 of the Listing Rules and with reference to AG 7 issued by the HKICPA.

For purposes of this engagement, we are not responsible for updating or reissuing any reports or opinions on any historical financial information used in compiling the Unaudited Pro Forma Financial Information, nor have we, in the course of this engagement, performed an audit or review of the financial information used in compiling the Unaudited Pro Forma Financial Information.

The purpose of unaudited pro forma financial information included in a circular is solely to illustrate the impact of a significant event or transaction on unadjusted financial information of the entity as if the event had occurred or the transaction had been undertaken at an earlier date selected for purposes of the illustration. Accordingly, we do not provide any assurance that the actual outcome of the Transactions at 31 December 2016 would have been as presented.

— 660 —

APPENDIX V UNAUDITED PRO FORMA FINANCIAL INFORMATION OF THE ENLARGED GROUP

A reasonable assurance engagement to report on whether the unaudited pro forma financial information has been properly compiled on the basis of the applicable criteria involves performing procedures to assess whether the applicable criteria used by the directors in the compilation of the unaudited pro forma financial information provide a reasonable basis for presenting the significant effects directly attributable to the event or transaction, and to obtain sufficient appropriate evidence about whether:

• The related pro forma adjustments give appropriate effect to those criteria; and

• The unaudited pro forma financial information reflects the proper application of those adjustments to the unadjusted financial information.

The procedures selected depend on the reporting accountant’s judgment, having regard to the reporting accountant’s understanding of the nature of the company, the event or transaction in respect of which the unaudited pro forma financial information has been compiled, and other relevant engagement circumstances.

The engagement also involves evaluating the overall presentation of the unaudited pro forma financial information.

We believe that the evidence we have obtained is sufficient and appropriate to provide a basis for our opinion.

Opinion

In our opinion:

• (a) the Unaudited Pro Forma Financial Information has been properly compiled by the directors of the Company on the basis stated;

• (b) such basis is consistent with the accounting policies of the Group; and

• (c) the adjustments are appropriate for the purposes of the Unaudited Pro Forma Financial Information as disclosed pursuant to paragraph 4.29(1) of the Listing Rules.

PricewaterhouseCoopers

Certified Public Accountants

Hong Kong, 31 August 2017

— 661 —

GENERAL INFORMATION

APPENDIX VI

1. RESPONSIBILITY STATEMENT

This circular, for which the Directors collectively and individually accept full responsibility, includes particulars given in compliance with the Listing Rules for the purpose of giving information with regard to the Group. The Directors, having made all reasonable enquiries, confirm that to the best of their knowledge and belief, the information contained in this circular is accurate and complete in all material respects and not misleading or deceptive, and there are no other matters the omission of which would make any statement herein or this circular misleading.

2. DISCLOSURE OF INTERESTS

(a) Director’s Interest in the securities of the Company and its associated corporation

As at the Latest Practicable Date, save as disclosed below, none of the Directors or the chief executive of the Company had or was deemed to have any interests and short positions in the Shares, underlying Shares or debentures of the Company and its associated corporations (within the meaning of Part XV of the SFO) (i) which were required to be notified to the Company and the Stock Exchange pursuant to Divisions 7 and 8 of Part XV of the SFO (including interests and short positions which they were taken or deemed to have under such provisions of the SFO); or (ii) which were required, pursuant to section 352 of the SFO to be entered in the register referred to therein; or (iii) which were required to be notified to the Company and the Stock Exchange pursuant to the Model Code for Securities Transactions by Directors of Listed Companies contained in the Listing Rules, to be notified to the Company and the Stock Exchange:

— 662 —

APPENDIX VI

GENERAL INFORMATION

• (i) Interest in Shares of the Company and/or associated corporation

		Relevant		Approximate
		company		percentage of
		(including	Number of shares	interest in the
	Nature of	associated	of the relevant	relevant
Name of Director	Interest	corporations)	company (1)	company (2)
Mr. Sun Hongbin	Interest in	The Company	2,091,329,884 (L)	50.59%
	controlled
	corporations (3)
	Beneficial	The Company	10,090,000 (L)	0.24%
	interest
	Beneficial	Sunac	1 (L)	100%
	interest	International(4)
Mr. Wang Mengde	Beneficial	The Company	5,600,000 (L)	0.14%
	interest
Mr. Jing Hong	Beneficial	The Company	6,100,000 (L)	0.15%
	interest
Mr. Chi Xun	Beneficial	The Company	4,384,000 (L)	0.11%
	interest
Mr. Tian Qiang	Beneficial	The Company	2,602,000 (L)	0.06%
	interest
Mr. Shang Yu	Beneficial	The Company	1,150,000 (L)	0.03%
	interest

Notes:

• (1) The letter “L” denotes the person’s long position in such Shares.

• (2) Based on 4,133,867,109 Shares in issue as at the Latest Practicable Date.

(3) These Shares were held by Sunac International and 天津標的投資諮詢有限公司 (for identification only, Tianjin Biaodi Investment Consultancy Company Limited) (“ Tianjin Biaodi ”), which were wholly and beneficially owned by Mr. Sun. Mr. Sun was also the sole director of Sunac International. Mr. Sun was deemed to be interested in all these Shares by virtue of the SFO.

• (4) Sunac International is the holding company of the Company and therefore an “associated corporation” of the Company within the meaning of Part XV of the SFO.

— 663 —

GENERAL INFORMATION

APPENDIX VI

(ii) Interest in the underlying shares of the Company

			Approximate
		Number of	percentage of
		Underlying	interest in the
Name of Director	Nature of Interest	Shares (1)	Company (2)
Mr. Sun Hongbin	Beneficial interest	1,300,000	0.03%
Mr. Wang Mengde	Beneficial interest	7,400,000	0.18%
Mr. Jing Hong	Beneficial interest	3,500,000	0.08%
Mr. Chi Xun	Beneficial interest	3,200,000	0.08%
Mr. Tian Qiang	Beneficial interest	3,600,000	0.09%
Mr. Shang Yu	Beneficial interest	6,300,000	0.15%
Mr. Huang Shuping	Beneficial interest	4,950,000	0.12%

Note:

• (1) The interests in the underlying shares are in relation to the options granted under the share option schemes of the Company.

• (2) Based on 4,133,867,109 Shares in issue as at the Latest Practicable Date.

As at the Latest Practicable Date, save as disclosed above, none of the Directors was a director or employee of a company which had, or was deemed to have, an interest or a short position in the Shares or underlying Shares of the Company which would fall to be disclosed to the Company and the Stock Exchange under the provisions of Divisions 2 and 3 of Part XV of the SFO.

(b) Substantial shareholders’ interest

As at the Latest Practicable Date, so far as is known to any Director or chief executive of the Company, the following persons (other than a Director or chief executive of the Company) had interests or short positions in the Shares or underlying shares of the Company as recorded in the register kept by the Company pursuant to section 336 of the SFO which would fall to be disclosed to the Company under the provisions Divisions 2 and 3 of Part XV of the SFO.

— 664 —

GENERAL INFORMATION

APPENDIX VI

Long positions in the Shares and underlying Shares of the Company

			Approximate %
			of the issued
		Number of	share capital of
Name of Shareholder	Nature of interest	Shares interested	the Company (1)
Sunac International	Beneficial interest	2,042,623,884	49.41%
Ping An Bank Company
Limited, Shanghai Pilot
Free-Trade Zone Branch
(平安銀行股份有限公司
上海自貿試驗區分行)	Security interest	1,589,549,451	38.45%
Ping An Bank Company
Limited	Interest in a controlled
(平安銀行股份有限公司)	corporation	1,589,549,451	38.45%
Ping An Insurance (Group)
Company of China, Ltd.
(中國平安保險(集團)股份	Interest in a controlled
有限公司)	corporation	1,589,549,451	38.45%

Note:

(1) Based on 4,133,867,109 Shares in issue as at the Latest Practicable Date.

Save as disclosed above, as at the Latest Practicable Date, no other person (other than the Directors or chief executives of the Company) had an interest or short position in the Shares or underlying Shares of the Company which were recorded in the register kept by the Company pursuant to section 336 of the SFO which would fall to be disclosed to the Company under the provisions of Divisions 2 and 3 of Part XV of the SFO.

3. DIRECTORS’ COMPETING INTERESTS

As at the Latest Practicable Date, none of the Directors and their respective associates was interested in any business apart from the Group’s businesses which competed, or might compete, either directly or indirectly, with the businesses of the Group pursuant to Rule 8.10 of the Listing Rules.

— 665 —

GENERAL INFORMATION

APPENDIX VI

4. DIRECTORS’ INTERESTS IN ASSETS

As at the Latest Practicable Date, none of the Directors had any interest, either directly or indirectly, in any assets which had since 31 December 2016 (being the date to which the latest published audited consolidated financial statements of the Group were made up), up to the Latest Practicable Date, been acquired or disposed of by or leased to, any member of the Group or were proposed to be acquired or disposed of by, or leased to, any member of the Group.

5. DIRECTORS’ SERVICE CONTRACTS

As at the Latest Practicable Date, none of the Directors had any existing or proposed service contract with any member of the Group which would not expire or would not be determinable by such member of the Group within one year without payment of compensation (other than statutory compensation).

6. DIRECTORS’ INTERESTS IN CONTRACT OR ARRANGEMENT OF SIGNIFICANCE

As at the Latest Practicable Date, none of the Directors was materially interested, directly or indirectly, in any contract or arrangement entered into by any member of the Group subsisting at the Latest Practicable Date and which was significant in relation to the business of the Group.

7. MATERIAL CONTRACTS

The following contracts (being contracts entered into outside the ordinary course of business carried on by the Group) had been entered into by members of the Group within the two years immediately preceding the date of this circular and up to the Latest Practicable Date:

• (a) the placing and subscription agreement dated 24 July 2017 entered into between the Company, Sunac International and the placing agents, namely Citigroup Global Markets Limited and Morgan Stanley & Co. International plc, pursuant to which the placing agents agreed to place 220,000,000 existing Shares at HK$18.33 per Share on behalf of Sunac International, and Sunac International agreed to subscribe for 220,000,000 new Shares at HK$18.33 per Share;

• (b) the agreement dated 19 July 2017 entered into between Sunac Real Estate and 大連萬達商業地產股份有限公司 (Dalian Wanda Commercial Properties Co., Ltd.) (“ Dalian Wanda Commercial Properties* ”), pursuant to which Sunac Real Estate agreed to acquire (by itself or any parties designated by it) and Dalian Wanda Commercial Properties agreed to dispose of 91% equity interest of 13 cultural and tourism project companies in the PRC at a total consideration of RMB43,844,000,000 and to amend certain terms and conditions of the cooperation between the parties as more particularly described in the Company’s announcement dated 19 July 2017;

• (c) the framework agreement dated 10 July 2017 entered into between Sunac Real Estate and Dalian Wanda Commercial Properties, pursuant to which Sunac Real Estate agreed to acquire (by itself or any parties designated by it) and Dalian Wanda agreed to dispose of

— 666 —

GENERAL INFORMATION

APPENDIX VI

• 91% equity interest of 13 cultural and tourism project companies in the PRC and 100% interest of 76 city hotels at the consideration of approximately RMB29,575,000,000 and RMB33,595,260,800, respectively (note: the acquisition of such 76 city hotels did not proceed, details of which are set out in the Company’s announcement dated 19 July 2017);

• (d) the equity transfer framework agreement dated 5 June 2017 entered into between (i) 大連 融創置地有限公司 (Dalian Sunac Real Estate Co., Ltd.) (“ Dalian Sunac Real Estate ”), (ii) 潤德集團有限公司 (Runde Group Limited), (iii) 大連金信集團有限公司 (Dalian Jinxin Group Limited), (iv) 利豐私人有限公司 (Glory Gain Pte. Ltd.), (v) 上海豐海投資股份有限公司 (Shanghai Fenghai Investment Co., Ltd.), (vi) 大連潤德乾城 房地產開發有限公司 (Dalian Runde Qiancheng Real Estate Development Co., Ltd.) and (vii) 大連潤德良城房地產開發有限公司 (Dalian Runde Liangcheng Real Estate Development Co., Ltd.), pursuant to which Dalian Sunac Real Estate agreed to acquire the entire equity interest of Dalian Runde Qiancheng and the sharheolder’s loan amounted to RMB168,201,588.58 in aggregate at a total consideration of RMB3,232,088,700;

• (e) the equity transfer agreement dated 31 May 2017 entered into between (i) 重慶融創基業房 地產開發有限公司 (Chongqing Sunac Jiye Property Development Limited Company) (“ Chongqing Sunac ”), (ii) 重慶國際信託股份有限公司 (Chongqing International Trust Limited Company) (“ Chongqing Trust ”), (iii) 重慶老虎資產經營管理有限公司 (Chongqing Tiger Assets Operation and Management Limited Company) (“ Tiger Assets ”), (iv) Mr. Chen Yong, (v) 重慶潤江基礎設施投資有限公司 (Chongqing Runjiang Infrastructure Investment Limited Company) (“ Runjiang Infrastructure ”) and (vi) 重慶 華城富麗房地產開發有限公司 (Chongqing Huacheng Fuli Property Development Limited Company) (“ Huacheng Fuli* ”) in relation to the acquisition of 95% equity interest and debts in Huacheng Fuli at a total consideration of RMB1,860,000,000;

• (f) the cooperation agreement dated 31 May 2017 entered into between Chongqing Sunac, 中 建五局第三建設有限公司 (China Construction Fifth Engineering Bureau Third Construction Corp., Ltd) (“ CCFEB* ”) and Huacheng Fuli, pursuant to which Chongqing Sunac agreed to (i) pay RMB100,000,000 on behalf of Huacheng Fuli to CCFEB which will be used to settle part of the debts owed by the Target Company to CCFEB; and (ii) undertake the joint guarantee liabilities for the remaining debts owed by Huacheng Fuli to CCFEB in the amount of RMB404,229,000;

• (g) the financial advisory services agreement dated 31 May 2017 entered into between Chongqing Sunac, Chongqing Trust and Huacheng Fuli, pursuant to which Chongqing Sunac agreed to settle, on behalf of Huacheng Fuli, the financial advisory fee of RMB140,000,000 owed by Huacheng Fuli to Chongqing Trust on or before 31 May 2017;

• (h) the cooperation development agreement dated 31 May 2017 entered into between 重慶上錦 建築規劃設計諮詢有限公司 (Chongqing Shangjin Property Planning and Design Consulting Limited Company) (“ Shangjin Property* ”), Chongqing Sunac, Tiger Assets

— 667 —

GENERAL INFORMATION

APPENDIX VI

• and Huacheng Fuli, pursuant to which, among other matters, Chongqing Sunac agreed to dispose of, and Shangjin Property agreed to acquire, subject to the acquisition of 95% equity interest in the Target Company by Chongqing Sunac having been completed, 35% equity interest in the Target Company for a consideration of RMB70,000,000;

• (i) the cooperation agreement dated 12 May 2017 entered into between Tianjin Sunac Aocheng Investment Company Limited (天津融創奧城投資有限公司) (“ Tianjin Sunac ”), an indirect wholly-owned subsidiary of the Company, and Kunming Xingyao Sports City Company Limited (昆明星耀體育運動城有限公司) (“ Kunming Xingyao ”) in relation to the acquisition of 80% equity and debt interest in Tianjin Xingyao Investment Company Limited (天津星耀投資有限公司) (“ Tianjin Xingyao* ”) at a total consideration of approximately RMB10,254,240,579.30;

• (j) the restructuring agreement dated 12 May 2017 entered into between Tianjin Sunac, Kunming Xingyao, Tianjin Xingyao and three trust companies incorporated in the PRC in relation to the repayment of debts owed by Tianjin Xingyao to those three trust companies, and all supplemental agreements thereto, details of which are set out in the Company’s announcement dated 12 May 2017;

• (k) the equity transfer agreement dated 1 March 2017 centered into between, among others, Beijing Sunac Raycom Real Estate Company Limited (北京融創科技地產有限公司) (“ Beijing Sunac ”), an indirect wholly-owned subsidiary of the Company, as purchaser, and Tianjin Bolian Investment Partnership Enterprise (Limtied Partnership) (天津博聯投資合 夥企業(有限合夥)), as vendor, in relation to the acquisition of 30% equity and debt interest in Beijing Rongzhi Ruifeng Investment Company Limited* (北京融智瑞豐投資有限公司) at a total consideration of RMB686,812,439.55;

• (l) the equity transfer agreement dated 1 March 2017 entered into between, among others, Beijing Sunac, as purchaser, and Lenovo (Beijing) Limited (聯想(北京)有限公司), as vendor, in relation to the acquisition of 49% equity interests in Chengdu Lianchuang Rongjin Investment Limited (成都聯創融錦投資有限責任公司) at a total consideration of RMB1,617,330,459.59;

• (m) the Acquisition Agreements;

• (n) the agreements under the Contractual Arrangements;

• (o) the capital increase agreement dated 9 January 2017 entered into by Sunac Real Estate, Homelink Real Estate Agency Co., Ltd. (北京鏈家房地產經紀有限公司) (“ Homelink ”) and a group of 15 operation shareholders of Homelink, including eight natural persons (namely, Zuo Hui, Shan Yigang, Xu Wangang, Dang Jie, Du Xin, Chen Rong, Ruan Guangjie and Gao Jun) and seven limited partnerships (namely, 上海毓睿投資管理中心(有 限合夥) (Shanghai Yurui Investment Management Centre (Limited Partnership)), 上海毓 思投資管理中心(有限合夥) (Shanghai Yusi Investment Management Centre (Limited Partnership)), 上海毓揚投資管理中心(有限合夥) (Shanghai Yuyang Investment Management Centre (Limited Partnership)), 上海鼎聰投資管理中心(有限合夥) (Shanghai

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Dingcong Investment Management Centre (Limited Partnership)), 上海博隽投資管理中心 (有限合夥) (Shanghai Bojun Investment Management Centre (Limited Partnership)), 上海站本投資管理中心(有限合夥) (Shanghai Bojun Investment Management Centre (Limited Partnership)) and 北京合誠創投投資合夥企業(有限合夥) (Shanghai Hecheng Venture Capital Investment Management Centre (Limited Partnership)) in relation to the subscription of the increased registered capital of Homelink at a total consideration of RMB2,600,000,000;

• (p) the equity transfer agreement dated 6 January 2017 entered into between Chengdu Sunac Hongchang Properties Development Co., Ltd. (成都融創泓昶房地產開發有限公司) (“ Chengdu Sunac ”), an indirect wholly-owned subsidiary of the Company, and Huoerguosi Bochen Investment Co., Ltd. (霍爾果斯博辰創業投資有限公司), Huoerguosi Chenghui Tantu Investment Co., Ltd. (霍爾果斯誠慧坦途創業投資有限公司), and Huoerguosi Kaige Investment Co., Ltd. (霍爾果斯凱格創業投資有限公司) in relation to the acquisition of the entire equity interest in Chengdu Zixi Commercial Management Co., Ltd. (成都紫希 商業管理有限公司) (“ Chengdu Zixi* ”) at a total consideration of RMB1,352,584,598.19;

• (q) the equity transfer agreement dated 6 January 2017 entered into between Chengdu Sunac, Chengdu Zixi, Xiao Miaomiao and Xiao Yongqiong in relation to the acquisition of 10% equity interest in the Second Target Company at a total consideration of RMB157,366,946.32;

• (r) the cooperation framework agreement dated 20 December 2016 entered into between Hangzhou Rongxinheng Investment Co., Ltd. (杭州融鑫恒投資有限公司) (“ Hangzhou Rongxinheng ”), an indirect wholly-owned subsidiary of the Company, and Hangzhou Jinhan Investment Co., Ltd. (杭州金翰投資有限公司) (“ Hangzhou Jinhan ”) in relation to the acquisition of 17.34% equity and debt interests in Hangzhou Jinhong Properties Co., Ltd.* (杭州金泓置業有限公司) at a total consideration of RMB435,731,198.71;

• (s) the cooperation framework agreement dated 20 December 2016 entered into between Hangzhou Rongxinheng and Hangzhou Jinhan in relation to the acquisition of 17.34% equity and debt interests in Hangzhou Jinhe Properties Co., Ltd.* (杭州金合置業有限公司) at a total consideration of RMB148,613,522.92;

• (t) the cooperation framework agreement dated 20 December 2016 entered into between Hangzhou Rongxinheng, Jincheng Real Estate Group Co., Ltd. (金成房地產集團有限公 司) and Hangzhou Jinhan in relation to the acquisition of 34% equity and debt interests in Hangzhou Ducheng Properties Co., Ltd. (杭州都城置業有限公司) at a total consideration of RMB274,306,530.51;

• (u) the equity transfer agreement dated 29 November 2016 between Sunac (Qingdao) Real Estate Company Limited (融創(青島)置地有限公司) (“ Qingdao Sunac* ”), an indirect wholly-owned subsidiary of the Company, and Calxon Group (Shanghai) Limited

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• Company (嘉凱城集團(上海)有限公司) (“ Calxon Group ”) in relation to the sale and purchase of the entire equity interest in Qingdao Calxon Real Estate Development Company Limited (青島嘉凱城房地產開發有限公司) (“ Qingdao Calxon ”) at a total consideration of RMB3,662,000,000;

• (v) the guarantee agreement dated 29 November 2016 executed by Beijing Sunac Property Construction and Investment Limited(北京融創建投房地產有限公司)(“ Beijing Sunac Property ”) in favour of Calxon Group in respect of, among other things, the obligation of Qingdao Calxon to repay the shareholder loans to Calxon Group and its related parties;

• (w) the counter guarantee agreement dated 29 November 2016 executed by Beijing Sunac Property in favour of Calxon Group and China Evergrande Group Company Limited (恒 大地產集團有限公司) (“ Evergrande* ”) in respect of all the liabilities and expenses, including the principal and interest of the loan, any penalties, damages and expenses which may be payable by Calxon Group and Evergrande under the certain guarantee provided by them in respect of liabilities of Qingdao Calxon, details of which are set out in the Company’s announcement dated 29 November 2016;

• (x) the supplemental agreement (the “ Supplemental Agreement 1 ”) dated 28 October 2016 entered into among Sunac Real Estate, Raycom (as defined below) and Legend Holdings (as defined below) to adjust the consideration payable for the equity interests of 40 target companies under the Framework Agreement 1 (as defined below);

• (y) the subscription agreement dated 26 September 2016 entered into between the Company and Sunac International Investment Holdings Ltd in connection with the subscription of 453,074,433 new Shares by Sunac International Investment Holdings Ltd at a subscription price of HK$6.18 per Share;

• (z) the subscription agreement dated September 2016 entered into between Tianjin Jujin Property Management Ltd. (天津聚金物業管理有限公司) (“ Jujin Property ”), an indirect wholly-owned subsidiary of the Company, and Jinke Property Group Co., Ltd. (金科地產 集團股份有限公司) (“ Jinke Property ”), pursuant to which Jujin Property agreed to subscribe for 907,029,478 shares in Jinke Property at a subscription price of RMB4.41 per share, representing a total consideration of RMB3,999,999,997.98;

• (aa) the asset transfer framework agreement (the “ Framework Agreement 1 ”) dated 16 September 2016 entered into among Sunac Real Estate, an indirect wholly-owned subsidiary of the Company, and Raycom Real Estate Development Co., Ltd. (融科智地房 地產股份有限公司) (“ Raycom ”) and Legend Holdings Corporation (聯想控股股份有限公 司) (“ Legend Holdings* ”) pursuant to which Raycom and Legend Holdings agreed to sell, and Sunac Real Estate agreed to purchase: (i) the relevant equity interests of 40 target companies; (ii) the loans and payables owed by the onshore target companies and their respective subsidiaries to Raycom and Legend Holdings; and (iii) the loans owed by an offshore target company to Right Lane Limited (南明有限公司), an offshore subsidiary of Legend Holdings, for a total consideration of approximately RMB13,850,820,000 (having taken into account the adjustments pursuant to the Supplemental Agreement 1);

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GENERAL INFORMATION

• (bb) the acquisition framework agreement (the “ Framework Agreement 2 ”) dated 16 September 2016 entered into between Sunac Real Estate and Legend Holdings pursuant to which Legend Holdings agreed to sell and Sunac Real Estate agreed to purchase (i) 100% equity interest in Beijing EnsenCare Holdings Co., Ltd. (北京安信頤和控股有限公司) (“ EnsenCare* ”) at the consideration of RMB87,000,000; and (ii) the outstanding shareholders’ borrowings of RMB50,000,000 owed by EnsenCare to Legend Holdings and accrued but unpaid interest of RMB617,300. As such, the total consideration contemplated under the Framework Agreement 2 shall be RMB137,617,300, subject to adjustments pursuant to the terms and conditions of the Framework Agreement 2;

• (cc) the equity transfer framework agreement dated 22 August 2016 entered into between Hainan Sunac Properties Co., Ltd. (海南融創基業房地產有限公司) (“ Hainan Sunac ”), an indirect wholly-owned subsidiary of the Company, and Hangzhou Jinhan Investment Co., Ltd. (杭州金翰投資有限公司) (“ Hangzhou Jinhan ”), pursuant to which Hainan Sunac agreed to acquire and Hangzhou Jinhan agreed to dispose of 50% equity and debt interests in each of 杭州禾明投資有限公司(Hangzhou Heming Investment Co., Ltd.), 杭州融悅投 資有限公司 (Hangzhou Rongyue Investment Co., Ltd.) and 浙江悅成投資有限公司 (Zhejiang Yuecheng Investment Co., Ltd.*), of which (i) the consideration for the equity interests was RMB1,954,717,510; and (ii) the relevant outstanding shareholder’s borrowings owed by the relevant target companies to Hangzhou Jinhan was RMB99,117,490. Therefore, the aggregate consideration for the acquisition was RMB2,053,835,000;

• (dd) the framework agreement dated 19 May 2016 (as supplemented by two supplemental agreements both dated 22 July 2016) entered into between the Company and Top Spring International Holdings Limited, pursuant to which the Company agreed to (a) acquire the entire equity interest in six target companies and (b) settle the inter-company loans among the six target companies and/or the project companies owned by such target companies, which are holding interests in property development projects in Shanghai, Nanjing, Shenzhen, Huizhou and Hangzhou in the PRC, at a total adjusted consideration of RMB4,225,230,000;

• (ee) the cooperation agreement dated 18 March 2016 entered into between Shanghai Sunac Property Development Co., Ltd. (“ Shanghai Sunac ”), a wholly-owned subsidiary of the Company, and Shanghai Moke Real Estate Co. Ltd (上海摩克房地產有限公司) (“ Shanghai Moke ”) in connection with the formation of a joint venture and the acquisition of two target projects. Pursuant to the cooperation agreement, the equity interests of the joint venture will ultimately be held as to 80% and 20% by Shanghai Sunac and Shanghai Moke, respectively, and the joint venture will be responsible for the development of the two target projects. The aggregate amount payable by Shanghai Sunac under the cooperation agreement is approximately RMB3,305,347,400 together with accrued interest;

• (ff) the cooperation agreement dated 25 February 2016 entered into between Tianjin Sunac Ao Cheng Investment Co., Ltd (“ Tianjin Sunac Ao Cheng ”), a wholly-owned subsidiary of the Company, as purchaser, Sunac Real Estate, as guarantor of the purchaser, Zhengzhou Meisheng Real Estate Development Co. Ltd. (鄭州美盛房地產開發有限公司) (“ Zhengzhou

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Meisheng ”) as vendor and Henan Zhaoteng Investment Co. Ltd (河南省兆騰投資有限公 司), as guarantor of the vendor, pursuant to which, Tianjin Sunac Ao Cheng agreed to acquire and Zhengzhou Meisheng agreed to dispose of 70% equity and debt interests in Zhongmu Meisheng Real Estate Co., Ltd (中牟美盛置業有限公司) (“ Zhongmu Meisheng ”) at a total consideration of RMB753,916,863.21;

• (gg) the two equity transfer agreements dated 1 February 2016 entered into between Shanghai Sunac as purchaser and Der Group Co. Ltd. (“ Der Group ”) and Mr. HE Yonggang as vendors (collectively the “ Suzhou Vendors ”), pursuant to which (i) Shanghai Sunac agreed to acquire and the Suzhou Vendors agreed to dispose of the entire equity and debt interests in Suzhou Der Taihu Bay Properties Co., Ltd. (“ Suzhou Der Taihu Bay ”), of which the consideration for (a) the equity interests amounted to RMB404,459,419; and (b) the entire outstanding shareholder’s loan owed by Suzhou Der Taihu Bay to the Suzhou Vendors amounted to RMB685,540,581, representing an aggregate consideration of RMB1,090,000,000 (“ Acquisition I ”); and (ii) Shanghai Sunac agreed to acquire and the Suzhou Vendors agreed to dispose of the entire equity and debt interests in Suzhou Der Taihu Town Real Estate Co., Ltd. (“ Suzhou Der Taihu Town ”), of which the consideration for (a) the equity interests amounted to RMB28,308,318; and (b) the entire outstanding shareholder’s loan owed by Suzhou Der Taihu Town to the Suzhou Vendors amounted to RMB51,691,682, representing an aggregate consideration of RMB80,000,000 (“ Acquisition II ”). As such, the total consideration for the transactions contemplated under Acquisition I and Acquisition II is RMB1,170,000,000;

• (hh) the equity transfer agreement dated 15 January 2016 entered into between Shanghai Sunac Ruifeng Investment Co., Ltd. (上海融創睿豐投資有限公司) (“ Shanghai Sunac Ruifeng ”), a wholly-owned subsidiary of the Company, as purhcaser and Beijing Fengdan Investment Management Co., Ltd. (北京楓丹投資管理有限公司) (“ Beijing Fengdan ”) as vendor in relation to the acquisition of 12.5% equity interest in Shanghai Fengdan Lishe Real Estate Development Co., Ltd. (上海楓丹麗舍房地產開發有限公司) (“ Shanghai Fengdan ”) and the outstanding shareholder’s loan owing by Shanghai Fengdan to Beijing Fengdan at a total consideration of RMB437,500,000;

• (ii) the equity transfer agreement dated 15 January 2016 entered into between Shanghai Sunac Ruifeng as purhcaser and Shenzhen Zhongshan Xingye Trading Co., Ltd. (深圳市仲山興業 貿易有限公司) (“ Shenzhen Zhongshan ”) as vendor in relation to the acquisition of 5% equity interest in Shanghai Fengdan and the outstanding shareholder’s loan owing by Shanghai Fengdan to Shenzhen Zhongshan at a total consideration of RMB175,000,000;

• (jj) the equity transfer agreement dated 15 January 2016 entered into between Shanghai Sunac Ruifeng as purhcaser and Shenzhen Hua Shun Digital Technology Co., Ltd. (深圳市華順數 碼科技有限公司) (“ Shenzhen Hua Shun ”) as vendor in relation to the acquisition of 12.5% equity interest in Shanghai Fengdan and the outstanding shareholder’s loan owing by Shanghai Fengdan to Shenzhen Hua Shun at a total consideration of RMB437,500,000;

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• (kk) the equity transfer agreement dated 15 January 2016 entered into between Shanghai Sunac Ruifeng as purhcaser and Shenzhen SZITIC Property Development Co., Ltd. (深圳深國投 房地產開發有限公司) (“ SZITIC Property ”) as vendor in relation to the acquisition of 7.855% equity interest in Shanghai Fengdan and the outstanding shareholder’s loan owing by Shanghai Fengdan to SZITIC Property at a total consideration of RMB274,925,000;

• (ll) the equity transfer agreement dated 13 January 2016 entered into between Shanghai Sunac and Jiangsu Youyi Hesheng Property Development Co., Ltd. (“ Jiangsu Youyi ”) for an aggregate consideration of RMB1,038,234,731, pursuant to which (i) Shanghai Sunac agreed to acquire and Jiangsu Youyi agreed to dispose of, 95% equity interest in Suzhou Xinyou Real Estate Co. Ltd. (蘇州新友置地有限公司) (“ Suzhou Xinyou ”), for RMB183,652,145, and (ii) Shanghai Sunac agreed to repay on behalf of Suzhou Xinyou the entire outstanding shareholder’s loan in the amount of RMB854,582,586 owing by it to Jiangsu Youyi;

• (mm)the agreement dated 4 January 2016 entered into between Shanghai Sunac Ruifeng and Shanghai Pudong Development Group Limited (上海浦東發展(集團)有限公司) (“ Shanghai Pudong Development ”), pursuant to which Shanghai Sunac Ruifeng agreed to acquire 9.4% interest in Shanghai Huafeng for a consideration of RMB752,000,000 and Shanghai Pudong Development was entrusted to hold the 9.4% indirect interest in Shanghai Huafeng on behalf of Shanghai Sunac Ruifeng;

• (nn) the supplemental agreement dated 30 November 2015 entered into between, among others, Tianjin Sunac Ao Cheng and Sunac Real Estate, which are both wholly-owned subsidiaries of the Company and Xian Titan Real Estate Group Co., Ltd (“ Xian Titan ”), pursuant to which the parties thereto agreed to amend and supplement the cooperative agreement dated 2 September 2015 with respect to the acquisition of Jinan Lihao Properties Co., Ltd. (濟南 立皓置業有限公司) and Jinan Liyuan Properties Co., Ltd. (濟南立遠置業有限公司);

• (oo) the supplemental agreements dated 30 November 2015 entered into between, among others, Tianjin Sunac Ao Cheng, Sunac Real Estate and Xian Titan, pursuant to which the parties thereto agreed to amend and supplement the cooperative agreement dated 2 September 2015 with respect to the acquisition of Tianmao Properties (Nanjing)., Ltd. (天茂置業(南京)有限 公司), Titan International Investment Group Limited and Nanjing Titan Technology Investment Development Co., Ltd. (南京天朗科技投資發展有限公司);

• (pp) the equity transfer agreement dated 29 October 2015 entered into between Shanghai Sunac Real Estate Development Co., Ltd (“ Shanghai Sunac Real Estate ”), a wholly-owned subsidiary of the Company, as purchaser, and Shanghai Yuehua Kangjian Investment Management Co., Ltd (“ Shanghai Yuehua ”) as vendor, pursuant to which Shanghai Sunac Real Estate agreed to, or would procure its designated wholly-owned subsidiary to, acquire and Shanghai Yuehua agreed to dispose of, the entire equity interest in Shanghai Lingwu Investment Management Co., Ltd. (“ Shanghai Lingwu ”) and the outstanding shareholder’s loan owing by Shanghai Lingwu to Shanghai Yuehua at a total consideration of RMB1,400,000,000; and

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GENERAL INFORMATION

• (qq) the cooperative agreement dated 2 September 2015 entered into between, among others, Tianjin Sunac Ao Cheng and Tianjin Sunac Zhidi Co., Ltd (“ Sunac Zhidi ”), which are both wholly-owned subsidiaries of the Company, and Xian Titan, pursuant to which Tianjin Sunac Ao Cheng and Xian Titan agreed to cooperate to establish a joint venture company in Xian, the PRC (the “ Joint Venture ”) with a registered capital of RMB100 million, and was contributed as to 80% by Tianjian Sunac Ao Cheng and 20% by Xian Titan. Upon establishment of the Joint Venture, it (i) shall acquire the equity interest in the two property projects under development in Xian, the PRC held by Xian Titan for a total consideration of RMB187.9 million; (ii) can acquire and develop the projects to be developed by Xian Tital or its affiliated companies in Xian, the PRC by participating in the process of tender, auction and listing; and (iii) shall cooperate with Xian Titan in the acquisition and development of the reserve projects in Xian to be participated or intended to be acquired by Xian Titan or its affiliated companies and subsidiaries in the future by way of joint injection of funds for the establishment of project companies of which Xian Titan and the Joint Venture shall hold no more than 30% and no less than 70% equity interest in such project companies, respectively. Further, pursuant to the cooperative agreement, Tianjin Sunac Ao Cheng agreed to acquire (by itself or through its designated company) the 100% equity interest in the project companies of Xian Titan with property projects located in Jinan, Nanjing and Chengdu of the PRC for a total consideration of RMB496.17 million.

8. EXPERT’S QUALIFICATION AND CONSENT

The following is the qualification of the expert whose name and/or reports are contained in this circular:

Name	Qualification
PricewaterhouseCoopers	Certified public accountants, Hong Kong
SHINEWING (HK) CPA Limited	Certified public accountants, Hong Kong
Beijing Puhongde CPA Co., Ltd.	Certified public accountants, the PRC
(general partnership)

As at the Latest Practicable Date, each of the above experts (i) had no shareholding in any member of the Group and did not have any right, whether legally enforceable or not, to subscribe for or to nominate persons to subscribe for securities in any member of the Group; (ii) had no direct or indirect interest in any assets which had been, since 31 December 2016 (the date to which the latest published audited consolidated financial statements of the Group were made up), acquired, disposed of by, or leased to any member of the Group, or were proposed to be acquired, disposed of by, or leased to any member of the Group; and (iii) has given and has not withdrawn its consent to the issue of this circular with the inclusion of its letter and the reference to its name included herein in the form and context in which it appears.

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9. LITIGATION

As at the Latest Practicable Date, none of the members of the Group was engaged in any litigation, arbitration or claim of material importance and no litigation, arbitration or claim of material importance was known to the Directors to be pending or threatened against any member of the Group.

10. GENERAL

• (a) The registered office of the Company is 190 Elgin Avenue, George Town, Grand Cayman KY1- 9005, Cayman Islands.

• (b) The head office of the Company is at 10/F, Building C7, Magnetic Plaza, Binshuixi Road, Nankai District, Tianjin 300381, the PRC and the principal place of business of the Company in Hong Kong is at 36/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong.

• (c) Mr. Gao Xi (“ Mr. Gao ”) is one of the joint company secretaries of the Company and the Company has engaged Ms. Mok Ming Wai (“ Ms. Mok ”) as the other joint company secretary of the Company to assist Mr. Gao.

Mr. Gao is currently the vice president of the Group and a joint company secretary of the Company. Since joining the Group in 2007, he had held different positions in various departments of the Group, including the capital operations centre, financial management center and financing management department. Since 2011, he began to act successively as the manager, director and general manager of the investor relations department of the Company. Mr. Gao has participated in the work in relation to the Company’s initial public offering, and upon the listing of the shares of the Company on the Stock Exchange in 2010, he contributed to establish the investor relations department, where he is mainly responsible for listing compliance, corporate governance, investor relations and offshore financing related matters. Mr. Gao graduated from Shanxi University of Finance & Economics in 2008 with a master’s degree in quantitative economics.

Ms. Mok is a director of KCS Hong Kong Limited. She has over 15 years of professional and in-house experience in the company secretarial field. She is a fellow member of the Hong Kong Institute of Chartered Secretaries and the Institute of Chartered Secretaries and Administrators in the United Kingdom.

• (d) The Cayman Islands principal share registrar and transfer office is Royal Bank of Canada Trust Company (Cayman) Limited, 4th Floor, Royal Bank House, 24 Shedden Road, George Town, Grand Cayman KY1-1110, Cayman Islands.

• (e) The Hong Kong branch share registrar and transfer is Computershare Hong Kong Investor Services Limited, at Shops 1712-1716, 17th Floor, Hopewell Centre, 183 Queen’s Road East, Wanchai, Hong Kong.

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• (f) This circular is prepared in both English and Chinese. In the event of inconsistency, the English text shall prevail over its Chinese text unless otherwise specified.

11. DOCUMENTS AVAILABLE FOR INSPECTION

Copies of the following documents will be available for inspection during normal business hours from 9:00 a.m. to 6:00 p.m. on any weekday (except public holidays) at the principal place of business of the Company in Hong Kong at 36/F, Tower Two, Times Square, 1 Matheson Street, Causeway Bay, Hong Kong up to and including the date falling on 14 days from the date of this circular:

• (a) the memorandum and articles of association of the Company;

• (b) the annual reports of the Company for the three years ended 31 December 2016;

• (c) the annual reports of Leshi Internet for the three years ended 31 December 2016;

• (d) the quarterly report of Leshi Internet for the three months ended 31 March 2017;

• (e) the report on unaudited pro forma financial information of the Enlarged Group from PricewaterhouseCoopers, the text of which is set out in Appendix V to this circular;

• (f) the material contracts referred to in the paragraph headed “Material Contracts” in this Appendix;

• (g) the circular of the Company dated 4 May 2017;

• (h) the circular of the Company dated 26 May 2017; and

• (i) this circular.

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